ADTRAN HOLDINGS, INC., 10-Q/A filed on 8/14/2023
Amended Quarterly Report
v3.23.2
Document and Entity Information - shares
 3 Months Ended
Mar. 31, 2023
May 08, 2023
Cover [Abstract]    
Document Type 10-Q/A  
Amendment Flag true  
Document Period End Date Mar. 31, 2023  
Document Fiscal Year Focus 2023  
Document Fiscal Period Focus Q1  
Entity Registrant Name ADTRAN Holdings, Inc.  
Trading Symbol ADTN  
Entity Central Index Key 0000926282  
Current Fiscal Year End Date --12-31  
Entity Filer Category Large Accelerated Filer  
Entity Small Business false  
Entity Emerging Growth Company false  
Entity Common Stock, Shares Outstanding   78,655,333
Entity Current Reporting Status Yes  
Entity Interactive Data Current Yes  
Entity Shell Company false  
Entity File Number 001-41446  
Entity Tax Identification Number 87-2164282  
Entity Address, Address Line One 901 Explorer Boulevard  
Entity Address, City or Town Huntsville  
Entity Address, State or Province AL  
Entity Address, Postal Zip Code 35806-2807  
City Area Code 256  
Local Phone Number 963-8000  
Entity Incorporation, State or Country Code DE  
Document Quarterly Report true  
Document Transition Report false  
Title of 12(b) Security Common Stock, Par Value $0.01 per share  
Security Exchange Name NASDAQ  
Amendment Description ADTRAN Holdings, Inc. (“ADTRAN,” the “Company,” “we,” “us” or “our”) is filing this Amendment No. 1 on Form 10-Q/A (this “Amendment No. 1”) to amend and restate certain portions of the Company’s Quarterly Report on Form 10-Q for the period ended March 31, 2023 filed with the U.S. Securities and Exchange Commission (the “SEC”) on May 10, 2023 (the “Original Filing”).As previously disclosed in the Company’s Current Report on Form 8-K filed on August 10, 2023, subsequent to the Company’s second fiscal quarter earnings call on August 8, 2023 and during the preparation of its unaudited condensed consolidated financial statements to be included in the Company’s Form 10-Q for the second fiscal quarter ended June 30, 2023, the Company determined that the principal amount of indebtedness outstanding under the Company’s revolving credit facility with a syndicate of banks, including Wells Fargo Bank, National Association (“Wells Fargo”), should be classified as non-current liabilities on the Company’s condensed consolidated balance sheet. Therefore, the outstanding Wells Fargo revolving credit facility balances for the following prior periods were misclassified have been adjusted from current to noncurrent liabilities on the balance sheets as follows: $60.0 million as of September 30, 2022, $60.0 million as of December 31, 2022, and $180.0 million as of March 31, 2023. On August 10, 2023, the Audit Committee of the Board of Directors (the “Audit Committee”) of the Company concluded, after considering the recommendations of management and discussing with the Company’s independent registered public accounting firm, PricewaterhouseCoopers LLP (“PwC”), that (i) the Company’s unaudited condensed consolidated financial statements as of and for the quarter and year-to-date period ended March 31, 2023 included in the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 2022, (ii) the Company’s audited consolidated financial statements as of and for the year ended December 31, 2022 included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2022, and (iii) the Company’s unaudited condensed consolidated financial statements as of and for the quarter ended March 31, 2023 included in the Original Filing, respectively (collectively, the “Non-Reliance Periods”), should not be relied upon. Additionally, the Audit Committee concluded that management's report on internal control over financial reporting as of December 31, 2022, the opinion of PwC on the Company's consolidated financial statements as of and for fiscal year ended December 31, 2022 and the opinion of PwC on the effectiveness of the Company's internal control over financial reporting as of December 31, 2022, should no longer be relied upon.As a result of the above described misclassification and the identification of the material weakness (as described in Item 4), the Company is filing this Amendment No. 1 to (i) restate the disclosure on the effectiveness of the Company’s disclosure controls and procedures and restate management’s report on internal control over financial reporting in Part I, Item 4 of the Original Filing to reflect management’s conclusion that the Company’s internal control over financial reporting and disclosure controls and procedures were not effective at March 31, 2023, (ii) restate the Company’s condensed consolidated financial statements to reflect the adjustment as of March 31, 2023 of $180.0 million of short-term indebtedness to long-term indebtedness, (iii) add two additional risk factors related to the material weakness and restatement, (iv) restate the cash requirements table within Part I, Item 2, MD&A of the Original Filing reflect the adjustment as of March 31, 2023 of $180.0 million of short-term indebtedness to long-term indebtedness, and (v) amend Part II – Item 6 Exhibits of the Original Filing to include currently dated certifications from the Company’s Chief Executive Officer and Chief Financial Officer as required by Section 302 and 906 of the Sarbanes-Oxley Act of 2002.Pursuant to Rule 12b-15 promulgated by the SEC under the Securities Exchange Act of 1934, as amended, the Company has included the entire text of Part I, Items 1, 2 and 4, as well as Part II, Items 1A and 6, of the Original Filing in this Amendment No. 1. There have been no changes to the text of Part I, Items 1, 2 and 4 or Part II, Items 1A and 6 other than the changes stated in the immediately preceding paragraph. Other than as described above and through the inclusion with this Amendment No. 1 of new certifications by management and amendments to the list of exhibits contained in Part II, Item 6 of the Original Filing, this Amendment No. 1 speaks only as of the date of the Original Filing and does not amend, supplement, or update any information contained in the Original Filing to give effect to any subsequent events (including with respect to the cover page of the Original Filing, which has been updated only to present this filing as Amendment No. 1). Accordingly, this Amendment No. 1 should be read in conjunction with the Original Filing and our reports (including any amendments thereto) filed with the SEC subsequent to the Original Filing.  
v3.23.2
Condensed Consolidated Balance Sheets (Unaudited) - USD ($)
$ in Thousands
Mar. 31, 2023
Dec. 31, 2022
Current Assets    
Cash and cash equivalents $ 136,457 $ 108,644
Short-term investments (includes $1,058 and $340 of available-for-sale securities as of March 31, 2023 and December 31, 2022, respectively, reported at fair value) 1,058 340
Accounts receivable, less allowance for credit losses of $53 and $49 as of March 31, 2023 and December 31, 2022, respectively 262,043 279,435
Other receivables 30,938 32,831
Inventory, net 416,291 427,531
Prepaid expenses and other current assets 37,021 33,577
Total Current Assets 883,808 882,358
Property, plant and equipment, net 111,969 110,699
Deferred tax assets 81,631 67,839
Goodwill 385,755 381,724
Intangibles, net 379,286 401,211
Other non-current assets 63,152 66,998
Long-term investments (includes $8,155 and $8,913 of available-for-sale securities as of March 31, 2023 and December 31, 2022, respectively, reported at fair value) 32,994 32,665
Total Assets 1,938,595 1,943,494
Current Liabilities    
Accounts payable 198,596 237,699
Revolving credit agreements outstanding 10,843 35,936
Notes Payable   24,598
Unearned revenue 55,611 41,193
Accrued expenses and other liabilities 27,424 35,235
Accrued wages and benefits 30,333 44,882
Income tax payable, net 19,397 9,032
Total Current Liabilities 342,204 428,575
Non-current revolving credit agreement outstanding 180,000 60,000
Deferred tax liabilities 51,850 61,629
Non-current unearned revenue 24,907 19,239
Pension liability 10,698 10,624
Deferred compensation liability 28,674 26,668
Non-current lease obligations 21,446 22,807
Other non-current liabilities 15,986 10,339
Total Liabilities 675,765 639,881
Commitments and contingencies (see Note 20)
Redeemable Non-Controlling Interest 442,668  
Equity    
Common stock, par value $0.01 per share; 200,000 shares authorized; 78,655 shares issued and 78,361 outstanding as of March 31, 2023 and 78,088 shares issued and 77,889 shares outstanding as of December 31, 2022 787 781
Additional paid-in capital 762,035 895,834
Accumulated other comprehensive income 55,251 46,713
Retained earnings 8,006 55,338
Treasury stock at cost: 294 and 198 shares as of March 31, 2023 and December 31, 2022, respectively (5,917) (4,125)
Non-controlling interest   309,072
Total Equity 820,162 1,303,613
Total Liabilities, Redeemable Non-Controlling Interest and Equity $ 1,938,595 $ 1,943,494
v3.23.2
Condensed Consolidated Balance Sheets (Unaudited) (Parenthetical) - USD ($)
$ in Thousands
Mar. 31, 2023
Dec. 31, 2022
Statement of Financial Position [Abstract]    
Short-term investments, available-for-sale securities at fair value $ 1,058 $ 340
Accounts receivable, allowance for credit losses 53 49
Long-term investments, available-for-sale securities fair value $ 8,155 $ 8,913
Common stock, par value $ 0.01 $ 0.01
Common stock, shares authorized 200,000,000 200,000,000
Common stock, shares issued 78,655,000 78,088,000
Common stock, shares outstanding 78,361,000 77,889,000
Treasury stock, shares 294,000 198,000
v3.23.2
Condensed Consolidated Statements of Loss (Unaudited) - USD ($)
shares in Thousands, $ in Thousands
 3 Months Ended
Mar. 31, 2023
Mar. 31, 2022
Revenue    
Total Revenue $ 323,912 $ 154,518
Cost of Revenue    
Total Cost of Revenue 236,104 100,202
Gross Profit 87,808 54,316
Selling, general and administrative expenses 67,397 27,893
Research and development expenses 70,143 26,491
Operating Loss (49,732) (68)
Interest and dividend income 304 204
Interest expense (3,287) (30)
Net investment gain (loss) 1,252 (3,415)
Other expense, net (303) (226)
Loss Before Income Taxes (51,766) (3,535)
Income tax benefit 11,313 2,408
Net Loss (40,453) (1,127)
Less: Net Loss attributable to non-controlling interest [1] (5,989)  
Net Loss attributable to ADTRAN Holdings, Inc. $ (34,464) $ (1,127)
Weighted average shares outstanding – basic 78,358 49,113
Weighted average shares outstanding – diluted 78,358 49,113
Loss per common share attributable to ADTRAN Holdings, Inc. - basic $ (0.44) $ (0.02)
Loss per common share attributable to ADTRAN Holdings, Inc. - diluted $ (0.44) $ (0.02)
Network Solutions [Member]    
Revenue    
Total Revenue $ 282,418 $ 138,374
Cost of Revenue    
Total Cost of Revenue 219,130 90,653
Gross Profit 63,288 47,721
Services & Support [Member]    
Revenue    
Total Revenue 41,494 16,144
Cost of Revenue    
Total Cost of Revenue 16,974 9,549
Gross Profit $ 24,520 $ 6,595
[1] Includes $3.2 million of net loss attributable to non-controlling interests pre-DPLTA and $2.8 million of annual recurring compensation earned by redeemable non-controlling interests and accrued by the Company post-DPLTA.
v3.23.2
Condensed Consolidated Statements of Loss (Unaudited) (Parenthetical)
$ in Thousands
 3 Months Ended
Mar. 31, 2023
USD ($)
Net loss attributable to non-controlling interest $ (5,989) [1]
Annual recurring compensation earned (2,809)
Pre-DPLTA [Member]  
Net loss attributable to non-controlling interest 3,200
Post-DPLTA [Member]  
Annual recurring compensation earned $ 2,800
[1] Includes $3.2 million of net loss attributable to non-controlling interests pre-DPLTA and $2.8 million of annual recurring compensation earned by redeemable non-controlling interests and accrued by the Company post-DPLTA.
v3.23.2
Condensed Consolidated Statements of Comprehensive Loss (Unaudited) - USD ($)
$ in Thousands
 3 Months Ended
Mar. 31, 2023
Mar. 31, 2022
Statement of Comprehensive Income [Abstract]    
Net Loss $ (40,453) $ (1,127)
Other Comprehensive Income (Loss), net of tax    
Net unrealized gain (loss) on available-for-sale securities 69 (724)
Defined benefit plan adjustments 35 (13)
Foreign currency translation gain (loss) 8,678 (905)
Other Comprehensive Income (Loss), net of tax 8,782 (1,642)
Less: Comprehensive Income attributable to non-controlling interest, net of tax 244  
Comprehensive Loss attributable to ADTRAN Holdings, Inc., net of tax $ (31,915) $ (2,769)
v3.23.2
Condensed Consolidated Statements of Changes in Equity (Unaudited) - USD ($)
shares in Thousands, $ in Thousands
Total
ADVA Optical Networking SE [Member]
Common Stock [Member]
Additional Paid-in Capital [Member]
Additional Paid-in Capital [Member]
ADVA Optical Networking SE [Member]
Retained Earnings [Member]
Treasury Stock [Member]
Accumulated Other Comprehensive Income (Loss) [Member]
Non-controlling Interest [Member]
Non-controlling Interest [Member]
ADVA Optical Networking SE [Member]
Beginning Balance at Dec. 31, 2021 $ 357,102   $ 797 $ 288,946   $ 740,820 $ (661,547) $ (11,914)    
Beginning Balance, Shares at Dec. 31, 2021     79,652              
Net loss (1,127)         (1,127)        
Other comprehensive income (loss), net of tax (1,642)             (1,642)    
Dividend payments ($0.09 per share) (4,438)         (4,438)        
Dividends accrued on unvested RSUs 32         32        
Deferred compensation adjustments, net of tax (18)           (18)      
ADTRAN RSUs, PSUs, RSUs and restricted stock vested (54)         (895) 841      
ADTRAN Stock options exercised 568         (143) 711      
ADTRAN Stock-based compensation expense 1,893     1,893            
Ending Balance at Mar. 31, 2022 352,316   $ 797 290,839   734,249 (660,013) (13,556)    
Ending Balance, Shares at Mar. 31, 2022     79,652              
Beginning Balance at Dec. 31, 2022 $ 1,303,613   $ 781 895,834   55,338 (4,125) 46,713 $ 309,072  
Beginning Balance, Shares at Dec. 31, 2022 78,088   78,088              
Net loss $ (40,453)         (37,274)     (3,179)  
Reclassification and remeasurement from equity to mezzanine equity for non-controlling interests in ADVA   $ (443,757)     $ (137,620)         $ (306,137)
Other comprehensive income (loss), net of tax 8,782             8,538 $ 244  
Dividend payments ($0.09 per share) (7,076)         (7,076)        
Deferred compensation adjustments, net of tax (1,792)           (1,792)      
ADTRAN RSUs, PSUs, RSUs and restricted stock vested (138)   $ 6     (144)        
ADTRAN RSUs, PSUs, RSUs and restricted stock vested, Shares     561              
ADTRAN Stock options exercised $ 58         58        
ADTRAN Stock options exercised, Shares 6   6              
ADTRAN Stock-based compensation expense $ 3,812 $ 9   3,812 $ 9          
Redemption of redeemable non-controlling interest 343         343        
Foreign currency remeasurement of redeemable non-controlling interest (430)         (430)        
Annual recurring compensation earned (2,809)         (2,809)        
Ending Balance at Mar. 31, 2023 $ 820,162   $ 787 $ 762,035   $ 8,006 $ (5,917) $ 55,251    
Ending Balance, Shares at Mar. 31, 2023 78,655   78,655              
v3.23.2
Condensed Consolidated Statements of Changes in Equity (Unaudited) (Parenthetical) - $ / shares
 3 Months Ended
Mar. 31, 2023
Mar. 31, 2022
Statement of Stockholders' Equity [Abstract]    
Dividend payments $ 0.09 $ 0.09
v3.23.2
Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($)
$ in Thousands
 3 Months Ended
Mar. 31, 2023
Mar. 31, 2022
Cash flows from operating activities:    
Net loss $ (40,453) $ (1,127)
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:    
Depreciation and amortization 33,402 3,661
Amortization of debt issuance cost 146  
(Gain) loss on investments, net (3,154) 3,304
Stock-based compensation expense 3,812 1,893
Deferred income taxes (24,019)  
Other, net (1) (62)
Inventory reserves 16,051 (1,754)
Changes in operating assets and liabilities:    
Accounts receivable, net 17,658 8,697
Other receivables 1,980 (6,205)
Inventory (2,764) (29,685)
Prepaid expenses, other current assets and other assets 1,118 (1,170)
Accounts payable (40,367) 24,818
Accrued expenses and other liabilities 6,349 3,803
Income taxes payable, net 10,316 (1,304)
Net cash (used in) provided by operating activities (19,926) 4,869
Cash flows from investing activities:    
Purchases of property, plant and equipment (8,439) (1,461)
Proceeds from sales and maturities of available-for-sale investments 930 10,265
Purchases of available-for-sale investments (516) (11,504)
Proceeds from beneficial interests in securitized accounts receivable 1,231  
Net cash used in investing activities (6,794) (2,700)
Cash flows from financing activities:    
Tax withholdings related to stock-based compensation settlements (6,258) (54)
Proceeds from stock option exercises 58 568
Dividend payments (7,076) (4,438)
Proceeds from draw on revolving credit agreements 138,236 8,000
Repayment of revolving credit agreements (43,464) (8,000)
Non-controlling interest put option buyback (1,176)  
Repayment of notes payable (24,692)  
Net cash provided by (used in) financing activities 55,628 (3,924)
Net increase (decrease) in cash, cash equivalents and restricted cash 28,908 (1,755)
Effect of exchange rate changes (1,095) (1,032)
Cash and cash equivalents, beginning of period 108,644 56,818
Cash and cash equivalents, end of period 136,457 54,031
Supplemental disclosure of cash financing activities:    
Cash paid for interest 1,610 30
Cash used in operating activities related to operating leases 4,057 482
Supplemental disclosure of non-cash investing activities:    
Right-of-use assets obtained in exchange for lease obligations 486 332
Purchases of property, plant and equipment included in accounts payable $ 4,354 $ 392
v3.23.2
Summary of Significant Accounting Policies
 3 Months Ended
Mar. 31, 2023
Accounting Policies [Abstract]  
Summary of Significant Accounting Policies

GENERAL

ADTRAN Holdings, Inc. (“ADTRAN” or the “Company”) is a leading global provider of networking and communications platforms, software, systems and services focused on the broadband access market, serving a diverse domestic and international customer base in multiple countries that includes Tier-1, -2 and -3 Service Providers, alternative Service Providers, such as utilities, municipalities and fiber overbuilders, cable/MSOs, SMBs and distributed enterprises. Our innovative solutions and services enable voice, data, video and internet-communications across a variety of network infrastructures and are currently in use by millions worldwide. We support our customers through our direct global sales organization and our distribution networks. Our success depends upon our ability to increase unit volume and market share through the introduction of new products and succeeding generations of products having optimal selling prices and increased functionality as compared to both the prior generation of a product and to the products of competitors in order to gain market share. To service our customers and grow revenue, we are continually conducting research and developing new products addressing customer needs and testing those products for the specific requirements of the particular customers. We offer a broad portfolio of flexible software and hardware network solutions and services that enable Service Providers to meet today’s service demands, while enabling them to transition to the fully converged, scalable, highly-automated, cloud-controlled voice, data, internet and video network of the future. In addition to our global headquarters in Huntsville, Alabama, and our European headquarters in Munich, Germany, we have sales and research and development facilities in strategic global locations.

In 2022, following the business combination (the “Business Combination”) with ADVA Optical Networking SE (“ADVA”), which included the Merger, we became the sole owner of and successor to ADTRAN, Inc. and the majority shareholder of ADVA. ADTRAN, Inc. is a leading global provider of open, disaggregated networking and communications solutions that enable voice, data, video, and internet communications across any network infrastructure. Its award-winning end-to-end fiber broadband solutions portfolio spans from OLTs to in-home services and intelligent SaaS solutions. ADVA is a global provider of open networking solutions with over 25 years of experience in optical networking, carrier Ethernet access and network synchronization. ADVA has led the industry for over two decades with open and secure networking solutions that carefully balance space, power and cost. Together, we serve customers in a broad range of industries in over 100 countries.

Effectiveness of the Domination and Profit and Loss Transfer Agreement

The DPLTA between the Company, as the controlling company, and ADVA Optical Networking SE, as the controlled company as executed on December 1, 2022, became effective on January 16, 2023, as a result of its registration with the commercial register (Handelsregister) of the local court (Amtsgericht) at the registered seat of ADVA (Jena).

Under the DPLTA, subject to certain limitations pursuant to applicable law and the specific terms of the DPLTA, (i) the Company is entitled to issue binding instructions to the management board of ADVA, (ii) ADVA will transfer its annual profit to the Company, subject to, among other things, the creation or dissolution of certain reserves, and (iii) the Company will generally absorb the annual net loss incurred by ADVA. The obligation of ADVA to transfer its annual profit to the Company applies for the first time to the profit generated subsequent to January 16, 2023.

Subject to certain limitations pursuant to applicable law and the specific terms of the DPLTA, the DPLTA provides that ADVA preferred shareholders be offered, at their election, (i) to put their ADVA shares to the Company in exchange for a compensation in cash of EUR 17.21 per share (the “Exit Compensation”), or (ii) to remain ADVA preferred shareholders and receive a recurring compensation in cash of EUR 0.59 (EUR 0.52 net under the current tax regime) per share for each full fiscal year of ADVA (the “Annual Recurring Compensation”). The Annual Recurring Compensation is due on the third banking day following the ordinary general shareholders’ meeting of ADVA for the respective preceding fiscal year (but in any event within eight months following expiration of the fiscal year) and is first granted for the 2023 fiscal year, payable for the first time after the ordinary general shareholders’ meeting of ADVA in 2024. The Annual Recurring Compensation payment is similar to a cumulative dividend, which does not require Board of Director approval as it is guaranteed under the DPLTA, and is accrued as a dividend liability when it is earned.

The adequacy of both forms of compensation have been challenged by the preferred shareholders of ADVA via court-led appraisal proceedings under German law, and it is possible that the courts in such appraisal proceedings may adjudicate a higher Exit Compensation or Annual Recurring Compensation (in each case, including interest thereon) than agreed upon in the DPLTA.

The opportunity for the ADVA preferred shareholders to tender ADVA preferred shares in exchange for Exit Compensation had been scheduled to expire on March 16, 2023. However, due to the appraisal proceedings that have been initiated in accordance with applicable German law, this time period for tendering shares has been extended pursuant to the German Stock Corporation Act (Aktiengesetz) and will end two months after the date on which a final decision in such appraisal proceedings has been published in the Federal Gazette (Bundesanzeiger).

 

Board Approval Purchase of ADVA Common Stock

On October 18, 2022, the Company's Board of Directors authorized the Company to purchase additional shares of ADVA through open market purchases not to exceed 15,346,544 shares.

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying unaudited Condensed Consolidated Financial Statements of ADTRAN Holdings, Inc. and its subsidiaries have been prepared pursuant to the rules and regulations of the SEC applicable to interim financial information presented in Quarterly Reports on Form 10-Q. Accordingly, certain information and notes required by generally accepted accounting principles in the United States of America (“U.S. GAAP”) for complete financial statements are not included herein. The December 31, 2022 Condensed Consolidated Balance Sheet is derived from audited financial statements but does not include all disclosures required by U.S. GAAP.

In the opinion of management, all adjustments necessary to fairly state these interim statements have been recorded and are of a normal and recurring nature. The results of operations for an interim period are not necessarily indicative of the results for the full year. The interim financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in ADTRAN Holdings, Inc. Annual Report on Form 10-K/A for the year ended December 31, 2022, filed with the SEC on August 14, 2023.

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expense during the reporting period. Significant estimates include allowance for credit losses on accounts receivable and contract assets, excess and obsolete inventory reserves, warranty reserves, customer rebates, determination and accrual of the deferred revenue related to performance obligations under contracts with customers, estimated costs to complete obligations associated with deferred and accrued revenues and network installations, estimated income tax provision and income tax contingencies, fair value of stock-based compensation, assessment of goodwill and other intangibles for impairment, estimated lives of intangible assets, estimates of intangible assets upon measurement, estimated pension liability and fair value of investments. Actual amounts could differ significantly from these estimates.

We assessed certain accounting matters that generally require consideration of forecasted financial information in context with the information reasonably available to us and the unknown future impacts of supply chain constraints, inflationary pressures, the energy crisis, currency fluctuations and political tensions as of March 31, 2023 and through the date of this report. The accounting matters assessed included, but were not limited to, the allowance for credit losses, stock-based compensation, carrying value of goodwill, intangibles and other long-lived assets, financial assets, valuation allowances for tax assets, revenue recognition and costs of revenue. Future conditions related to supply chain constraints, inflationary pressures, the energy crisis, rising interest rates, instability in the financial services industry, currency fluctuations and political tensions could result in further impacts to the Company's consolidated financial statements in future reporting periods.

Restatement of Previously Issued Financial Statements

During the second quarter of 2023, the Company determined that it overstated total current liabilities and understated non-current liabilities as of March 31, 2023 and December 31, 2022, due to a revolving credit agreement being classified as a current liability instead of a non-current liability. The total amount of liabilities remains unchanged. The Company restated the March 31, 2023 Condensed Consolidated Balance Sheet presented in this report by decreasing current revolving credit agreements outstanding by $180.0 million and increasing non-current revolving credit agreement outstanding by $180.0 million.

The following table reflects the impact of the restatement to the specific line items presented in the Company’s previously reported condensed consolidated financial statements as of March 31, 2023:

 

(In thousands)

 

As Reported

 

 

Adjustment

 

 

As Restated

 

Revolving credit agreements outstanding

 

$

190,843

 

 

$

(180,000

)

 

$

10,843

 

Total current liabilities

 

$

522,204

 

 

$

(180,000

)

 

$

342,204

 

Non-current revolving credit agreement outstanding

 

$

—

 

 

$

180,000

 

 

$

180,000

 

 

The accompanying applicable Notes have been updated to reflect the effects of the restatement as of March 31, 2023.

 

 

Redeemable Non-Controlling Interest

As of March 31, 2023 and December 31, 2022, the ADVA stockholders’ equity ownership percentage in ADVA was approximately 34.6% and 34.7%, respectively.

As a result of the effectiveness of the DPLTA on January 16, 2023, the ADVA shares, representing the equity interest in ADVA held by holders other than the Company, can be tendered at any time and are, therefore, redeemable and must be classified outside stockholders’ equity. Therefore, the permanent equity noncontrolling interest balance was reclassified to redeemable non-controlling interest ("RNCI") on January 16, 2023 and was remeasured to fair value based on the trading market price of the ADVA shares.

Subsequently, the carrying value of the RNCI is adjusted to its maximum redemption value at each reporting date when the maximum redemption value is greater than the initial carrying amount of the redeemable noncontrolling interest. However, the RNCI will be remeasured using the current exchange rate at each reporting date as long as the RNCI is currently redeemable. For the period of time that the DPLTA is in effect, the RNCI will continue to be presented as redeemable non-controlling interest outside of stockholders’ equity in the condensed consolidated balance sheets.

See Note 16 for additional information on RNCI.

Recently Adopted Accounting Pronouncements

In October 2021, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update ("ASU") 2021-08, Business Combinations (Topic 805) Accounting for Contract Assets and Contract Liabilities from Contracts with Customers, which would require an acquirer to recognize and measure acquired contract assets and contract liabilities in a manner consistent with how the acquiree recognized and measured them in its pre-acquisition financial statements in accordance with Topic 606, Revenue Recognition. The Company early adopted ASU 2021-08 on July 1, 2022 and the standard was applied retrospectively beginning with January 1, 2022.

Recent Accounting Pronouncements Not Yet Adopted

There are currently no accounting pronouncements not yet adopted that are expected to have a material effect on the Condensed Consolidated Financial Statements.

2. BUSINESS COMBINATION

ADVA Optical Networking SE

On August 30, 2021, ADTRAN and ADVA, entered into a Business Combination Agreement, pursuant to which both companies agreed to combine their respective businesses and each become subsidiaries of a new holding company, ADTRAN Holdings, Inc. (formerly known as Acorn HoldCo, Inc.) which was formed as a wholly-owned subsidiary of ADTRAN in order to consummate the transactions under the Business Combination Agreement. Under the terms of the Business Combination Agreement, on July 8, 2022, Acorn MergeCo, Inc, a Delaware corporation and wholly-owned direct subsidiary of the Company, merged with and into ADTRAN, Inc. leaving ADTRAN, Inc. surviving the merger as a wholly-owned direct subsidiary of the Company.

Additionally, pursuant to the Business Combination Agreement, on July 15, 2022, the Company made a public offer to exchange each issued and outstanding no-par value bearer share of ADVA for 0.8244 shares of Company Common Stock, par value $0.01 per share of the Company. The Exchange Offer was settled on Exchange Offer Settlement Date, on which date the Company acquired 33,957,538 bearer shares of ADVA, or 65.43% of ADVA’s outstanding bearer shares as of the Exchange Offer Settlement Date, in exchange for the issuance of an aggregate of 27,994,595 shares of Company Common Stock. Additionally, pursuant to the Business Combination Agreement, ADVA stock option holders were entitled to have their ADVA stock options assumed by ADTRAN Holdings, Inc. (applying the exchange ratio in the Business Combination Agreement), thereafter representing options to acquire stock of ADTRAN, Inc. The fair value of the ADVA stock options assumed by ADTRAN, Inc. was $12.8 million, estimated using the Monte Carlo method.

ADTRAN, Inc. and ADVA became subsidiaries of ADTRAN Holdings, Inc. as a result of the Business Combination. ADTRAN was determined to be the accounting acquirer of ADVA based on ADTRAN shareholders’ majority equity stake in the combined company, the composition of the board of directors and senior management of the combined company, among other factors. The Business Combination with ADVA has been accounted for using the acquisition method of accounting as per the provisions of Accounting Standards Codification 805, “Business Combinations” (“ASC 805”). The Business Combination Agreement used a fixed exchange ratio of Company Common Stock for ADVA shares of common stock, which resulted in a 36% equity stake for ADVA stockholders and a 64% equity stake for ADTRAN stockholders in the post-closing combined company (calculated on a fully diluted basis and utilizing the tender of 65.43% of ADVA’s current issued and outstanding share capital) as of July 15, 2022. Therefore, ADTRAN shareholders continued to hold a majority interest in the combined company following the completion of the Business Combination. Additionally, the Board of Directors is comprised of six members from ADTRAN and three members from ADVA; the current ADTRAN chief executive officer acts as the chairman of the Board of Directors and the former ADVA chief executive officer as the vice chairman of the Board of Directors. Additionally, the current ADTRAN chief executive officer and ADTRAN chief financial officer held these positions within the combined company immediately following the completion of the Business Combination. Based upon these and other considerations as outlined in ASC 805, ADTRAN represents the accounting acquirer.

The following table summarizes the purchase price for the ADVA business combination:

 

(In thousands, except shares, share price and exchange ratio)

 

Purchase Price

 

ADVA shares exchanged

 

 

33,957,538

 

Exchange ratio

 

 

0.8244

 

ADTRAN Holdings, Inc. shares issued

 

 

27,994,595

 

ADTRAN Holdings, Inc. share price on July 15, 2022

 

$

20.20

 

Purchase price paid for ADVA shares

 

$

565,491

 

Equity compensation (1)

 

$

12,769

 

Total purchase price

 

$

578,260

 

(1) Represents the portion of replacement share-based payment awards that relates to pre-combination vesting.

Assets acquired and liabilities assumed were recognized at their respective fair values as of July 15, 2022. In determining the fair value, the Company utilized various methods of the income, cost and market approaches depending on the asset or liability being fair valued. The estimation of fair value required significant judgment related to future net cash flows reflecting the risk inherent in each cash flow stream, competitive trends, market comparables and other factors. Inputs were generally determined by taking into account historical data, current and anticipated market conditions, and growth rates.

Developed technology and customer relationships were valued using the multi-period excess earnings method. Backlog was valued using the distributor method. Significant assumptions used in the discounted cash flow analysis for (i) developed technology were the revenue growth rates, long-term revenue growth rate, discount rate, and earnings before interest, taxes, depreciation and amortization (“EBITDA”) margins, obsolescence factors, income tax rate, tax depreciation, and economic depreciation; (ii) customer relationships were earnings before interest and taxes (“EBIT”) margins, contributory asset charges, and customer attrition rate; and (iii) backlog were EBIT margins, adjusted EBIT margins, and contributory asset charges.

The allocation of the purchase price to the assets acquired and liabilities assumed was subject to adjustment within the measurement period (up to one year from the acquisition date). The measurement period adjustments since initial preliminary estimates resulted from changes to the fair value estimates of the acquired assets and assumed liabilities based on finalizing the valuations of inventory, prepaid expenses and other current assets, property plant and equipment, intangible assets, other non-current assets and deferred tax assets and liabilities. The cumulative effect of all measurement period adjustments resulted in a decrease to recognized goodwill of $8.7 million.

 

The following table summarizes the purchase price allocation for each major class of assets acquired and liabilities assumed in the acquisition of ADVA (in thousands):

 

(In thousands)

 

 

 

Total purchase price

 

$

578,260

 

Non-controlling interest

 

$

316,415

 

Net Assets:

 

 

 

Cash and cash equivalents

 

$

44,003

 

Accounts receivable

 

 

114,659

 

Other receivables

 

 

1,457

 

Inventory

 

 

200,331

 

Prepaid expenses and other current assets

 

 

28,208

 

Property plant and equipment

 

 

55,480

 

Deferred tax assets

 

 

1,759

 

Intangibles

 

 

403,780

 

Other non-current assets

 

 

31,074

 

Accounts payable

 

 

(98,587

)

Current unearned revenue

 

 

(26,047

)

Accrued expenses and other liabilities

 

 

(59,600

)

Current portion of notes payable

 

 

(25,254

)

Income tax payable, net

 

 

(4,898

)

Tax liabilities

 

 

(1,400

)

Non-current unearned revenue

 

 

(11,498

)

Pension liability

 

 

(6,820

)

Other non-current liabilities

 

 

(6,094

)

Non-current portion of revolving credit agreements and notes payable

 

 

(15,250

)

Non-current lease obligations

 

 

(20,046

)

Deferred tax liabilities

 

 

(61,040

)

Total net assets acquired

 

$

544,217

 

Goodwill

 

$

350,458

 

The fair value of the assets acquired include accounts receivable of $114.7 million and other receivables of $1.5 million. The unpaid principal balance under these receivables is $118.5 million and $1.5 million, respectively. The difference between the fair value and the unpaid principal balance primarily represents amounts expected to be uncollectible.

The fair value of the identifiable intangible assets acquired as of the acquisition date:

 

(In thousands)

Estimated-average useful life (in years) (1)

 

 

Fair value

 

 

Income Statement Amortization Classification

Developed technology

 

8.5

 

 

$

291,925

 

 

 Cost of revenue - Network Solutions

Backlog

 

1.4

 

 

 

52,165

 

 

 Cost of revenue - Network Solutions and Services & Support

Customer relationships

 

10.5

 

 

 

32,704

 

 

 Selling, general and administrative expenses

Trade name

 

2.8

 

 

 

26,986

 

 

 Selling, general and administrative expenses

Total

 

 

 

$

403,780

 

 

 

 

(1) Determination of the weighted average period of the individual categories of intangible assets was based on the nature of the applicable intangible asset and the expected future cash flows to be derived from the intangible asset. Amortization of intangible assets with definite lives is recognized over the period of time the assets are expected to contribute to future cash flows.

Goodwill represents the excess of the purchase price over the fair value of the net tangible and intangible assets acquired. The ADVA acquisition resulted in the recognition of goodwill of $350.5 million, which the Company believes is attributable to the value driven by the Company’s expected growth of the business, synergies, and expanded market and product opportunities. Goodwill created as a result of the ADVA acquisition is not deductible for tax purposes.

After the Business Combination, the chief operating decision maker assessed and will continue to assess the Company’s performance and allocate resources to its two segments (1) Network Solutions and (2) Services & Support. The goodwill resulting from the Business Combination of $272.8 million was allocated to the Network Solutions segment, and $77.7 million was allocated to the Services & Support segment. See Note 18 of the Notes to Consolidated Financial Statements, included in this Amendment No. 1 for more information about the Company’s segments.

As of the acquisition date, the fair value of the non-controlling interest was approximately $316.4 million and determined using a market approach. As a portion of ADVA shares will remain trading after the Business Combination, the non-controlling interest was calculated using 17,941,496 ADVA shares held by non-controlling interest multiplied by the ADVA closing share price of €17.58 ($17.64 using the July 15, 2022 EUR to USD conversion rate of $1.00318) on July 15, 2022.

The Company included the financial results of ADVA in its consolidated financial statements since July 15, 2022, the acquisition date. The net revenue and net loss from the ADVA business for the period January 1, 2023 to March 31, 2023, were $192.3 million and $25.4 million, respectively, which are included in the Company’s Consolidated Statement of Loss. The net loss attributable to non-controlling interest from the ADVA business for the three months ended March 31, 2023 was $6.0 million.

As of March 31, 2023, the Company has incurred $26.1 million of transaction costs related to the Business Combination. During the three months ended March 31, 2023, we did not incur transaction costs related to the Business Combination. During the three months ended March 31, 2022, $1.5 million of transaction costs were incurred. These transaction costs are recorded in selling, general and administrative expense in the Consolidated Statements of Loss.

Supplemental Pro Forma Information (Unaudited)

The unaudited pro forma financial information in the table below summarizes the combined results of operations for ADTRAN and ADVA as though the Business Combination had occurred on January 1, 2022. The pro forma amounts have been adjusted for differences in basis of accounting which are determined before taking into effect the impacts of purchase accounting and Business Combination accounting impacts.

The following unaudited pro forma information is presented for illustrative purposes only. It is not necessarily indicative of the results of operations of future periods, the results of operations that actually would have been realized had the entities been a single company as of January 1, 2022, or the future operating results of the combined entities. The unaudited pro forma information does not give effect to the potential impact of current financial conditions, regulatory matters or any anticipated synergies, operating efficiencies or cost savings that may be associated with the acquisition. The unaudited pro forma information also does not include any integration costs that the Company may incur related to the acquisition as part of combining the operations of the companies.

 

 

Three Months Ended

 

(In thousands)

March 31, 2022

 

 

 

 

Revenue

$

345,844

 

Net loss

$

(73,489

)

 

3. REVENUE

The following is a description of the principal activities from which revenue is generated by reportable segment:

Network Solutions Segment - Includes hardware and software products that enable a digital future which support the Company's Subscriber, Access and Aggregation, and Optical Networking Solutions.

Services & Support Segment - Includes network design, implementation, maintenance and cloud-hosted services supporting the Company's Subscriber, Access and Aggregation, and Optical Networking Solutions.

Revenue by Category

In addition to the Company's reportable segments, revenue is also reported for the following three categories – Subscriber Solutions, Access & Aggregation Solutions and Optical Networking Solutions.

Prior to the Business Combination with ADVA on July 15, 2022, ADTRAN reported revenue across the following three categories: (1) Access & Aggregation, (2) Subscriber Solutions & Experience and (3) Traditional & Other Products. Following the Business Combination with ADVA, we have recast these revenues such that ADTRAN’s former Access & Aggregation revenue is combined with a portion of the applicable ADVA solutions to create Access & Aggregation Solutions, ADTRAN’s former Subscriber Solutions & Experience revenue is combined with a portion of the applicable ADVA solutions to create Subscriber Solutions, and the revenue from Traditional & Other products is now included in the applicable Access & Aggregation Solutions or Subscriber Solutions category. Optical Networking Solutions is a new revenue category added to represent a meaningful portion of ADVA’s portfolio.

Our Subscriber Solutions portfolio is used by Service Providers to terminate their access services infrastructure at the customer premises while providing an immersive and interactive experience for residential, business and wholesale subscribers. This revenue category includes hardware- and software-based products and services. These solutions include fiber termination solutions for residential, business and wholesale subscribers, Wi-Fi access solutions for residential and business subscribers, Ethernet switching and network edge virtualization solutions for business subscribers, and cloud software solutions covering a mix of subscriber types.

Our Access & Aggregation Solutions are solutions that are used by communications Service Providers to connect residential subscribers, business subscribers and mobile radio networks to the Service Providers’ metro network, primarily through fiber-based connectivity. This revenue category includes hardware- and software-based products and services. Our solutions within this category are a mix of fiber access and aggregation platforms, precision network synchronization and timing solutions, and access orchestration solutions that ensure highly reliable and efficient network performance.

Our Optical Networking Solutions are used by communications Service Providers, internet content providers and large-scale enterprises to securely interconnect metro and regional networks over fiber. This revenue category includes hardware- and software-based products and services. Our solutions within this category include open optical terminals, open line systems, optical subsystems and modules, network infrastructure assurance systems, and automation platforms that are used to build high-scale, secure and assured optical networks.

The following table disaggregates revenue by reportable segment and revenue category. Prior year amounts presented below have been reclassified to conform to the current period revenue category presentation:

 

 

 

Three Months Ended

 

 

 

March 31, 2023

 

 

March 31, 2022

 

(In thousands)

 

Network Solutions

 

 

Services & Support

 

 

Total

 

 

Network Solutions

 

 

Services & Support

 

 

Total

 

Subscriber Solutions

 

$

70,287

 

 

$

9,049

 

 

$

79,336

 

 

$

52,390

 

 

$

4,332

 

 

$

56,722

 

Access & Aggregation Solutions

 

 

84,554

 

 

 

12,266

 

 

 

96,820

 

 

 

85,984

 

 

 

11,812

 

 

 

97,796

 

Optical Networking Solutions

 

 

127,577

 

 

 

20,179

 

 

 

147,756

 

 

 

—

 

 

 

—

 

 

 

—

 

Total

 

$

282,418

 

 

$

41,494

 

 

$

323,912

 

 

$

138,374

 

 

$

16,144

 

 

$

154,518

 

 

The aggregate amount of transaction price allocated to remaining performance obligations that have not been satisfied as of March 31, 2023 and December 31, 2022 related to contractual maintenance agreements, contractual SaaS and subscription services, and hardware contracts that exceed one year in duration amounted to $389.0 million and $277.2 million, respectively. As of March 31, 2023, approximately 68% is expected to be recognized over the next 12 months and the remainder recognized thereafter. The majority of the Company's remaining performance obligations as of March 31, 2023 are related to contracts or orders that have an original expected duration of one year or less, for which the Company is electing to utilize the practical expedient available within the guidance, and are excluded from the transaction price related to these future obligations. The Company will generally satisfy the remaining performance obligations as we transfer control of the products ordered or services to our customers, excluding maintenance services, which are satisfied over time.

The following table provides information about receivables, contract assets and unearned revenue from contracts with customers:

 

 

 

As of

 

 

As of

 

(In thousands)

 

March 31, 2023

 

 

December 31, 2022

 

Accounts receivable, net

 

$

262,043

 

 

$

279,435

 

Contract assets(1)

 

$

1,972

 

 

$

1,852

 

Unearned revenue

 

$

55,611

 

 

$

41,193

 

Non-current unearned revenue

 

$

24,907

 

 

$

19,239

 

 

(1) Included in other receivables on the Condensed Consolidated Balance Sheets.

The Company is party to a receivables purchase agreement with a third party financial institution (the “Factor”). As of March 31, 2023 and December 31, 2022, accounts receivable totaling $15.6 million and $14.9 million, respectively, were sold, of which $1.2 million was retained by the Factor in the reserve account. The balance in the reserve account is included in other assets on the Condensed Consolidated Balance Sheets. As of March 31, 2023 and December 31, 2022, the Company had an allowance for doubtful accounts related to factored accounts receivable totaling less than $0.1 million. The cost of receivables purchase agreement is included in interest expense in the Condensed Consolidated Statements of Loss and totaled $0.3 million for the three months ended March 31, 2023.

Of the outstanding unearned revenue balances as of December 31, 2022, $25.6 million was recognized as revenue during the three months ended March 31, 2023. Of the $17.7 million of outstanding unearned revenue balances as of December 31, 2021, $5.4 million was recognized as revenue during the three months ended March 31, 2022.

Accounts Receivable

The Company records accounts receivable in the normal course of business as products are shipped or services are performed and invoiced, but payment has not yet been remitted by the customer. Accounts receivable balances are considered past due when payment has not been received by the date indicated on the relevant invoice or based on agreed upon terms between the customer and the Company.

As of March 31, 2023 and December 31, 2022, the Company’s outstanding accounts receivable balance was $262.0 million and $279.4 million, respectively. The Company assessed the need for an allowance for credit losses related to its outstanding accounts receivable using the historical loss-rate method as well as assessing asset-specific risks. The assessment of asset-specific risks included the evaluation of relevant available information, from internal and external sources, relating to current conditions that may affect a customer’s ability to pay, such as the customer’s current financial condition, credit rating by geographic location, as provided by a third party and/or by customer, if needed, and the overall macro-economic conditions in which the customer operates. The Company pooled assets by geographic location to determine if an allowance should be applied to its accounts receivable balance, assessing the specific country risk rating and overall economics of that particular country. If elevated risk existed, or customer specific risk indicated the accounts receivable balance was at risk, the Company further analyzed the need for an allowance related to specific accounts receivable balances. Additionally, the Company determined that significant changes to customer country risk rating from period-to-period and from the end of the prior year to the end of the current quarter would require further review and analysis by the Company.

The allowance for credit losses was $0.1 million and $49 thousand as of March 31, 2023 and December 31, 2022, respectively, related to accounts receivable.

Contract Assets

The Company records contract assets when it has recognized revenue but has not yet billed the customer. As of March 31, 2023 and December 31, 2022, the Company’s outstanding contract asset balance was $2.0 million and $1.9 million, respectively, which is included in other receivables on the Consolidated Balance Sheets. The Company assessed the need for an allowance for credit losses related to its outstanding contract assets using the historical loss-rate method as well as asset-specific risks. The Company’s historical losses related to contract assets receivable have been immaterial as evidenced by historical write-offs due to collectability. Asset-specific risk included the evaluation of relevant available information, from internal and external sources, relating to current conditions that may affect a customer’s ability to pay once invoiced, such as the customer’s financial condition, credit rating by geographic location as provided by a third party and/or by customer, if needed, and the overall macro-economic conditions in which the customer operates. The Company pooled assets by geographic location to determine if an allowance should be applied to its contract asset balance, assessing the specific country risk rating and the overall economics of that particular country. If elevated risk existed, or customer specific risk indicated the contract balance was at risk, the Company further analyzed the need for an allowance related to specific customer balances. Additionally, the Company determined that significant changes to customer country risk rating from period-to-period and from the end of the prior year to the end of the current quarter would be subject to further review and analysis by the Company.

No allowance for credit losses was recorded for the three months ended March 31, 2023 and 2022 related to contract assets.

4. INCOME TAXES

The Company's effective tax rate changed from a benefit of 68.1% of pre-tax income for the three months ended March 31, 2022, to a benefit of 21.9% of pre-tax income for the three months ended March 31, 2023. The change in the effective tax rate for the three months ended March 31, 2023, was driven primarily by a change in our estimated tax rate as a result of the closing of the Business Combination with ADVA during the third quarter of 2022, as well as the release of our domestic valuation allowance during the fourth quarter of 2022.

The Company continually reviews the adequacy of its valuation allowance and recognizes the benefits of deferred tax assets only as the assessment indicates that it is more likely than not that the deferred tax assets will be recognized in accordance with ASC 740, Income Taxes. As of March 31, 2023, the Company had net deferred tax assets totaling $35.0 million, and a valuation allowance totaling $5.2 million against those deferred tax assets. The remaining $29.8 million in deferred tax assets are primarily related to capitalized R&D expenses in the U.S., partially offset by net purchase price intangibles from the Business Combination closed with ADVA during the third quarter of 2022. Our assessment of the realizability of our deferred tax assets includes the evaluation of historical operating results as well as the evaluation of evidence which requires significant judgment, including the evaluation of our three-year cumulative income position, future taxable income projections and tax planning strategies. Should management’s conclusion change in the future and an additional valuation allowance, or a partial or full release of the valuation allowance becomes necessary, it may have a material effect on our consolidated financial statements.

 

Supplemental balance sheet information related to deferred tax assets (liabilities) is as follows:

 

 

 

As of March 31, 2023

 

(In thousands)

 

Deferred Tax Assets (Liabilities)

 

 

Valuation Allowance

 

 

Deferred Tax Assets (Liabilities), net

 

Domestic

 

$

75,432

 

 

$

(3,177

)

 

$

72,255

 

International

 

 

(40,450

)

 

 

(2,024

)

 

 

(42,474

)

Total

 

$

34,982

 

 

$

(5,201

)

 

$

29,781

 

 

 

 

As of December 31, 2022

 

(In thousands)

 

Deferred Tax Assets (Liabilities)

 

 

Valuation Allowance

 

 

Deferred Tax Assets (Liabilities), net

 

Domestic

 

$

61,726

 

 

$

(3,177

)

 

$

58,549

 

International

 

 

(50,315

)

 

 

(2,024

)

 

 

(52,339

)

Total

 

$

11,411

 

 

$

(5,201

)

 

$

6,210

 

 

5. STOCK-BASED COMPENSATION

For the three months ended March 31, 2023 and 2022, stock-based compensation expense was $2.6 million and $1.9 million, respectively.

PSUs, RSUs and Restricted Stock - ADTRAN Holdings, Inc.

The following table summarizes the RSUs and restricted stock outstanding as of December 31, 2022 and March 31, 2023 and the changes that occurred during the three months ended March 31, 2023:

 

 

 

Number of
Shares
(in thousands)

 

 

Weighted Avg. Grant Date Fair Value
(per share)

 

Unvested RSUs and restricted stock outstanding, December 31, 2022

 

 

1,086

 

 

$

17.54

 

RSUs and restricted stock granted

 

 

1,296

 

 

$

17.60

 

RSUs and restricted stock vested

 

 

(12

)

 

$

20.51

 

RSUs and restricted stock forfeited

 

 

(10

)

 

$

15.32

 

Unvested RSUs and restricted stock outstanding, March 31, 2023

 

 

2,360

 

 

$

17.65

 

 

During the three months ended March 31, 2023, the Company granted 0.7 million performance-based PSUs to its executive officers and certain employees. The grant-date fair value of these performance-based awards was based on the closing price of the Company’s stock on the date of grant. These awards vest over a three-year period, subject to the grantee’s continued employment, with the ability to earn shares in a range of 0% to 150% of the awarded number of PSUs based on the achievement of defined performance targets. Equity-based compensation expense with respect to these awards may be adjusted over the vesting period to reflect the probability of achievement of performance targets defined in the award agreements.

During the three months ended March 31, 2023, the Company granted 0.1 million performance-based PSUs to its executive officers. The grant-date fair value of these performance-based awards was based on the closing price of the Company’s stock on the date of grant. These awards vest over a two-year period, subject to the grantee’s continued employment, with the ability to earn shares in a range of 0% to 100% of the awarded number of PSUs based on the achievement of defined performance targets. Equity-based compensation expense with respect to these awards may be adjusted over the vesting period to reflect the probability of achievement of performance targets defined in the award agreements.

The fair value of RSUs and restricted stock is equal to the closing price of its stock on the date of grant. The fair value of PSUs with market conditions is calculated using a Monte Carlo simulation valuation method.

As of March 31, 2023, total unrecognized compensation expense related to non-vested market-based RSUs and restricted stock was approximately $24.6 million, which will be recognized over the remaining weighted-average period of 2.6 years. There was $11.9 million of unrecognized compensation expense related to unvested 2023 performance-based PSUs, which will be recognized over the remaining requisite service period of 2.6 years if achievement of the performance obligation becomes probable. Unrecognized compensation expense will be adjusted for actual forfeitures.

As of March 31, 2023, 2.0 million shares were available for issuance under stockholder-approved equity plans.

Stock Options - ADTRAN Holdings, Inc.

The following table summarizes ADTRAN Holdings, Inc. stock options outstanding as of December 31, 2022 and March 31, 2023 and the changes that occurred during the three months ended March 31, 2023:

 

 

Number of
Stock Options
(in thousands)

 

 

Weighted Avg.
Exercise Price
(per share)

 

 

Weighted Avg.
Remaining
Contractual
Life
(in years)

 

 

Aggregate
Intrinsic Value
(in thousands)

 

Stock options outstanding, December 31, 2022

 

 

3,148

 

 

$

14.37

 

 

 

3.42

 

 

$

16,251

 

Stock options exercised

 

 

(6

)

 

$

9.82

 

 

 

 

 

 

 

Stock options forfeited

 

 

(21

)

 

$

12.21

 

 

 

 

 

 

 

Stock options expired

 

 

(7

)

 

$

19.00

 

 

 

 

 

 

 

Stock options outstanding, March 31, 2023

 

 

3,114

 

 

$

14.38

 

 

 

3.17

 

 

$

10,198

 

Stock options exercisable, March 31, 2023

 

 

1,698

 

 

$

15.96

 

 

 

1.70

 

 

$

4,436

 

As of March 31, 2023, there was $7.3 million of unrecognized compensation expense related to stock options which will be recognized over the remaining weighted-average period of 2.2 years.

Pursuant to the Business Combination, which closed on July 15, 2022, ADVA stock option holders were entitled to have their ADVA stock options assumed by ADTRAN Holdings, Inc. (applying the exchange ratio in the Business Combination Agreement), thereafter representing options to acquire stock of ADTRAN Holdings, Inc. The maximum number of shares of ADTRAN Holdings, Inc. stock potentially issuable upon such assumption was 2.3 million shares. The period in which such options could be assumed ended July 22, 2022. A total of 2.1 million shares of ADTRAN Holdings, Inc. stock could be subject to assumed ADVA options. The determination of the fair value of stock options assumed by ADTRAN Holdings, Inc. was estimated using the Monte Carlo method and is affected by its stock price, as well as assumptions regarding a number of complex and subjective variables that may have a significant impact on the fair value estimate. The stock option pricing model requires the use of several assumptions that impact the fair value estimate. These variables include, but are not limited to, the volatility of the Company's stock price and employee exercise behaviors.

All of the options were previously issued at exercise prices that approximated fair market value at the date of grant.

The aggregate intrinsic value of stock options represents the total pre-tax intrinsic value (the difference between ADTRAN’s closing stock price on the last trading day of the quarter and the exercise price, multiplied by the number of in-the-money options) that would have been received by the option holders had all option holders exercised their options on March 31, 2023. The amount of aggregate intrinsic value was $10.2 million as of March 31, 2023 and will change based on the fair market value of ADTRAN’s stock. The total pre-tax intrinsic value of options exercised during the three months ended March 31, 2023 was $43 thousand.

Stock Options - ADVA Optical Networking SE

The following table summarizes ADVA Optical Networking SE stock options outstanding as of December 31, 2022 and March 31, 2023 and the changes that occurred during the three months ended March 31, 2023:

 

 

 

Number of
Options
(In thousands)

 

 

Weighted
Average
Exercise Price
(Per share)

 

 

Weighted Avg.
Remaining
Contractual Life
in Years

 

 

Aggregate
Intrinsic Value
(In thousands)

 

Stock options outstanding, December 31, 2022

 

 

81

 

 

$

8.58

 

 

 

4.00

 

 

$

1,222

 

Stock options exercised

 

 

—

 

 

$

—

 

 

 

 

 

 

 

Stock options forfeited

 

 

—

 

 

$

—

 

 

 

 

 

 

 

Stock options outstanding, March 31, 2023

 

 

81

 

 

$

8.67

 

 

 

3.75

 

 

$

1,198

 

Stock options exercisable, March 31, 2023

 

 

27

 

 

$

7.45

 

 

 

2.14

 

 

$

424

 

As of March 31, 2023, there was $0.1 million of unrecognized compensation expense related to stock options which will be recognized over the remaining weighted-average period of 3.8 years.

All of the options were previously issued at exercise prices that approximated fair market value at the date of grant.

The aggregate intrinsic value of stock options represents the total pre-tax intrinsic value (the difference between ADVA's closing stock price on the last trading day of the quarter and the exercise price, multiplied by the number of in-the-money options) that would have been received by the option holders had all option holders exercised their options on March 31, 2023. The amount of aggregate intrinsic value was $1.2 million as of March 31, 2023 and will change based on the fair market value of ADVA's stock.

6. INVESTMENTS

Debt Securities and Other Investments

The following debt securities and other investments were included on the Condensed Consolidated Balance Sheets and recorded at fair value:

 

 

 

As of March 31, 2023

 

 

 

Amortized

 

 

Gross Unrealized

 

 

Fair

 

(In thousands)

 

Cost

 

 

Gains

 

 

Losses

 

 

Value

 

Corporate bonds

 

$

2,218

 

 

$

4

 

 

$

(63

)

 

$

2,159

 

Municipal fixed-rate bonds

 

 

185

 

 

 

—

 

 

 

(4

)

 

 

181

 

Asset-backed bonds

 

 

734

 

 

 

1

 

 

 

(20

)

 

 

715

 

Mortgage/Agency-backed bonds

 

 

1,699

 

 

 

1

 

 

 

(82

)

 

 

1,618

 

U.S. government bonds

 

 

4,299

 

 

 

5

 

 

 

(151

)

 

 

4,153

 

Foreign government bonds

 

 

406

 

 

 

—

 

 

 

(19

)

 

 

387

 

Available-for-sale debt securities held at fair value

 

$

9,541

 

 

$

11

 

 

$

(339

)

 

$

9,213

 

 

 

 

As of December 31, 2022

 

 

 

Amortized

 

 

Gross Unrealized

 

 

Fair

 

(In thousands)

 

Cost

 

 

Gains

 

 

Losses

 

 

Value

 

Corporate bonds

 

$

2,538

 

 

$

5

 

 

$

(81

)

 

$

2,462

 

Municipal fixed-rate bonds

 

 

185

 

 

 

—

 

 

 

(5

)

 

 

180

 

Asset-backed bonds

 

 

818

 

 

 

1

 

 

 

(24

)

 

 

795

 

Mortgage/Agency-backed bonds

 

 

1,853

 

 

 

—

 

 

 

(105

)

 

 

1,748

 

U.S. government bonds

 

 

3,870

 

 

 

3

 

 

 

(188

)

 

 

3,685

 

Foreign government bonds

 

 

407

 

 

 

—

 

 

 

(24

)

 

 

383

 

Available-for-sale debt securities held at fair value

 

$

9,671

 

 

$

9

 

 

$

(427

)

 

$

9,253

 

 

The contractual maturities related to debt securities and other investments were as follows:

 

 

 

As of March 31, 2023

(In thousands)

 

Corporate
bonds

 

 

Municipal
fixed-rate
bonds

 

 

Asset-
backed
bonds

 

 

Mortgage/
Agency-
backed bonds

 

 

U.S. government
bonds

 

 

Foreign government bonds

 

 

Less than one year

 

$

369

 

 

$

181

 

 

$

—

 

 

$

—

 

 

$

508

 

 

$

—

 

 

One to two years

 

 

966

 

 

 

—

 

 

 

169

 

 

 

166

 

 

 

3,174

 

 

 

387

 

 

Two to three years

 

 

824

 

 

 

—

 

 

 

49

 

 

 

600

 

 

 

348

 

 

 

—

 

 

Three to five years

 

 

—

 

 

 

—

 

 

 

337

 

 

 

242

 

 

 

123

 

 

 

—

 

 

Five to ten years

 

 

—

 

 

 

—

 

 

 

—

 

 

 

238

 

 

 

—

 

 

 

—

 

 

More than ten years

 

 

—

 

 

 

—

 

 

 

160

 

 

 

372

 

 

 

—

 

 

 

—

 

 

Total

 

$

2,159

 

 

$

181

 

 

$

715

 

 

$

1,618

 

 

$

4,153

 

 

$

387

 

 

 

Actual maturities may differ from contractual maturities as some borrowers have the right to call or prepay obligations with or without call or prepayment penalties.

Realized gains and losses on sales of debt securities are computed under the specific identification method. The following table presents the gross realized gains and losses related to its debt securities:

 

 

 

Three Months Ended

 

 

 

March 31,

 

(In thousands)

 

2023

 

 

2022

 

     Gross realized gain on debt securities

 

$

4

 

 

$

12

 

     Gross realized loss on debt securities

 

 

(11

)

 

 

(40

)

Total (loss) gain recognized, net

 

$

(7

)

 

$

(28

)

Income generated from available-for-sale debt securities was recorded as interest and dividend income in the Condensed Consolidated Statements of Loss. No allowance for credit losses was recorded for the three months ended March 31, 2023 and 2022 related to available-for-sale debt securities. The Company’s investment policy provides limitations for issuer concentration, which limits, at the time of purchase, the concentration in any one issuer to 5% of the market value of its total investment portfolio. The Company did not purchase any available-for-sale debt security with credit deterioration during the three months ended March 31, 2023.

Realized and unrealized gains and losses related to marketable equity securities were as follows:

 

 

 

Three Months Ended

 

 

 

March 31,

 

(In thousands)

 

2023

 

 

2022

 

     Realized (loss) gain on equity securities sold

 

$

13

 

 

$

(25

)

     Unrealized (loss) gain on equity securities held

 

 

1,246

 

 

 

(3,362

)

Total (loss) gain recognized, net

 

$

1,259

 

 

$

(3,387

)

 

Income generated from marketable equity securities was recorded as interest and dividend income in the Condensed Consolidated Statements of Loss. U.S. GAAP establishes a three-level valuation hierarchy based upon observable and unobservable inputs for fair value measurement of financial instruments:


• Level 1 – Observable outputs; values based on unadjusted quoted prices for identical assets or liabilities in an active market;

• Level 2 – Significant inputs that are observable; values based on quoted prices in markets that are not active or model inputs that are observable either directly or indirectly;

• Level 3 – Significant unobservable inputs; values based on prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement. These inputs could include information supplied by investees.

The Company’s cash equivalents and investments held at fair value are categorized into this hierarchy as follows:

 

 

 

 

 

 

Fair Value Measurements as of March 31, 2023 Using

 

(In thousands)

 

Fair Value

 

 

Quoted Prices
in Active
Market for
Identical
Assets
(Level 1)

 

 

Significant
Other
Observable
Inputs
(Level 2)

 

 

Significant Unobservable Inputs
(Level 3)

 

Cash equivalents

 

 

 

 

 

 

 

 

 

 

 

 

US government securities

 

$

175

 

 

$

175

 

 

$

—

 

 

$

—

 

Money market funds

 

 

243

 

 

 

243

 

 

 

—

 

 

 

—

 

Available-for-sale debt securities

 

 

 

 

 

 

 

 

 

 

 

 

Corporate bonds

 

 

2,159

 

 

 

—

 

 

 

2,159

 

 

 

—

 

Municipal fixed-rate bonds

 

 

181

 

 

 

—

 

 

 

181

 

 

 

—

 

Asset-backed bonds

 

 

715

 

 

 

—

 

 

 

715

 

 

 

—

 

Mortgage/Agency-backed bonds

 

 

1,618

 

 

 

—

 

 

 

1,618

 

 

 

—

 

U.S. government bonds

 

 

4,153

 

 

 

4,153

 

 

 

—

 

 

 

—

 

Foreign government securities

 

 

387

 

 

 

—

 

 

 

387

 

 

 

—

 

Marketable equity securities

 

 

 

 

 

 

 

 

 

 

 

 

Marketable equity securities – various industries

 

 

821

 

 

 

821

 

 

 

—

 

 

 

—

 

Deferred compensation plan assets

 

 

24,013

 

 

 

24,013

 

 

 

—

 

 

 

—

 

Total

 

$

34,465

 

 

$

29,405

 

 

$

5,060

 

 

$

—

 

 

 

 

 

 

 

 

Fair Value Measurements as of December 31, 2022 Using

 

(In thousands)

 

Fair Value

 

 

Quoted Prices
in Active
Market for
Identical
Assets
(Level 1)

 

 

Significant
Other
Observable
Inputs
(Level 2)

 

 

Significant Unobservable Inputs
(Level 3)

 

Cash equivalents

 

 

 

 

 

 

 

 

 

 

 

 

Money market funds

 

$

228

 

 

$

228

 

 

$

—

 

 

$

—

 

Available-for-sale debt securities

 

 

 

 

 

 

 

 

 

 

 

 

Corporate bonds

 

 

2,462

 

 

 

—

 

 

 

2,462

 

 

 

—

 

Municipal fixed-rate bonds

 

 

180

 

 

 

—

 

 

 

180

 

 

 

—

 

Asset-backed bonds

 

 

795

 

 

 

—

 

 

 

795

 

 

 

—

 

Mortgage/Agency-backed bonds

 

 

1,748

 

 

 

—

 

 

 

1,748

 

 

 

—

 

U.S. government bonds

 

 

3,685

 

 

 

3,685

 

 

 

—

 

 

 

—

 

Foreign government bonds

 

 

383

 

 

 

—

 

 

 

383

 

 

 

—

 

Marketable equity securities

 

 

 

 

 

 

 

 

 

 

 

 

Marketable equity securities – various industries

 

 

804

 

 

 

804

 

 

 

—

 

 

 

—

 

Deferred compensation plan assets

 

 

22,942

 

 

 

22,942

 

 

 

—

 

 

 

—

 

Total

 

$

33,227

 

 

$

27,659

 

 

$

5,568

 

 

$

—

 

 

The fair value of its Level 2 securities is calculated using a weighted average market price for each security. Market prices are obtained from a variety of industry standard data providers, large financial institutions and other third-party sources. These multiple market prices are used as inputs into a distribution-curve-based algorithm to determine the daily market value of each security.

 

 

7. INVENTORY

Inventory consisted of the following:

 

 

 

As of

 

 

As of

 

(In thousands)

 

March 31, 2023

 

 

December 31, 2022

 

Raw materials

 

$

167,086

 

 

$

186,346

 

Work in process

 

 

7,383

 

 

 

12,087

 

Finished goods

 

 

241,822

 

 

 

229,098

 

Total inventory, net

 

$

416,291

 

 

$

427,531

 

Inventory reserves are established for estimated excess and obsolete inventory equal to the difference between the cost of the inventory and the estimated net realizable value of the inventory based on estimated reserve percentages, which considers historical usage, known trends, inventory age and market conditions. As of March 31, 2023 and December 31, 2022, inventory reserves were $73.3 million and $57.0 million, respectively.

8. PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment consisted of the following:

 

 

 

As of

 

 

As of

 

(In thousands)

 

March 31, 2023

 

 

December 31, 2022

 

Engineering and other equipment

 

$

173,968

 

 

$

170,785

 

Building

 

 

83,287

 

 

 

82,932

 

Computer hardware and software

 

 

82,682

 

 

 

80,455

 

Building and land improvements

 

 

51,081

 

 

 

47,861

 

Furniture and fixtures

 

 

23,525

 

 

 

22,403

 

Land

 

 

5,367

 

 

 

5,364

 

     Total property, plant and equipment

 

 

419,910

 

 

 

409,800

 

Less: accumulated depreciation

 

 

(307,941

)

 

 

(299,101

)

     Total property, plant and equipment, net

 

$

111,969

 

 

$

110,699

 

Long-lived assets used in operations are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable and the undiscounted cash flows estimated to be generated by the asset are less than the asset’s carrying value. During the three months ended March 31, 2023 and 2022, no impairment charges were recognized.

Depreciation expense was $7.6 million and $2.8 million for the three months ended March 31, 2023 and 2022, respectively, which is recorded in cost of revenue, selling, general and administrative expenses and research and development expenses in the Condensed Consolidated Statements of Loss.

 

9. GOODWILL

The changes in the carrying amount of goodwill for the three months ended March 31, 2023 are as follows:

 

(In thousands)

 

Network Solutions

 

 

Services & Support

 

 

Total

 

As of December 31, 2022

 

$

298,280

 

 

$

83,444

 

 

$

381,724

 

Foreign currency translation adjustments

 

 

3,139

 

 

 

892

 

 

 

4,031

 

As of March 31, 2023

 

$

301,419

 

 

$

84,336

 

 

$

385,755

 

 

Related to the Business Combination with ADVA the Company recognized $350.5 million of goodwill upon the merger on July 15, 2022. Goodwill represents the excess purchase price over the fair value of net assets acquired. We qualitatively assess the carrying value of goodwill each reporting period for events or circumstance changes that would more likely than not reduce the fair value of the reporting unit below its carrying amount. Based on its assessment of certain qualitative factors such as macro-economic conditions, industry and market considerations, costs factors and overall financial performance, management concluded that no such events or circumstance changes were identified that would suggest that the fair value of the goodwill was more likely than not greater than it's carrying amount as of March 31, 2023. No impairment of goodwill was recorded during the three months ended March 31, 2023 and 2022.

 

10. INTANGIBLE ASSETS

Intangible assets consisted of the following:

 

 

 

 

As of March 31, 2023

 

 

As of December 31, 2022

 

(In thousands)

Weighted Average Useful Life
(in years)

 

 

Gross Carrying Amount

 

 

Accumulated Amortization

 

 

Net Book Value

 

 

Gross Carrying Amount

 

 

Accumulated Amortization

 

 

Net Book Value

 

Customer relationships

 

10.9

 

 

$

54,103

 

 

$

(12,180

)

 

$

41,923

 

 

$

55,517

 

 

$

(12,772

)

 

$

42,745

 

Backlog

 

1.6

 

 

 

56,382

 

 

 

(35,348

)

 

 

21,034

 

 

 

55,782

 

 

 

(22,725

)

 

 

33,057

 

Developed technology

 

8.5

 

 

 

323,723

 

 

 

(31,604

)

 

 

292,119

 

 

 

320,364

 

 

 

(21,856

)

 

 

298,508

 

Licensed technology

 

9.0

 

 

 

5,900

 

 

 

(3,305

)

 

 

2,595

 

 

 

5,900

 

 

 

(3,141

)

 

 

2,759

 

Licensing agreements

 

8.5

 

 

 

560

 

 

 

(316

)

 

 

244

 

 

 

560

 

 

 

(298

)

 

 

262

 

Patents

 

7.3

 

 

 

500

 

 

 

(449

)

 

 

51

 

 

 

500

 

 

 

(431

)

 

 

69

 

Trade names

 

3.0

 

 

 

29,167

 

 

 

(7,847

)

 

 

21,320

 

 

 

29,066

 

 

 

(5,255

)

 

 

23,811

 

     Total

 

 

 

$

470,335

 

 

$

(91,049

)

 

$

379,286

 

 

$

467,689

 

 

$

(66,478

)

 

$

401,211

 

Intangible assets are reviewed for impairment whenever events and circumstances indicate impairment may have occurred. The Company assessed impairment triggers related to intangible assets during each financial period in 2023 and 2022. As a result, no quantitative impairment test of long-lived assets was performed as of March 31, 2023 and 2022, and no impairment losses of intangible assets were recorded during the three months ended March 31, 2023 and 2022.

Amortization expense was $25.8 million and $0.9 million in the three months ended March 31, 2023 and 2022, respectively, and was included in cost of revenue, selling, general and administrative expenses and research and development expenses in the Condensed Consolidated Statements of Loss.

Estimated future amortization expense of intangible assets was as follows:

 

 

 

As of

 

(In thousands)

 

March 31, 2023

 

2023

 

$

56,855

 

2024

 

 

58,129

 

2025

 

 

46,558

 

2026

 

 

43,292

 

2027

 

 

41,922

 

Thereafter

 

 

132,530

 

     Total

 

$

379,286

 

 

11. HEDGING

The Company has certain forward rate agreements to hedge foreign currency exposure of expected future cash flows in foreign currency. The Company does not hold or issue derivative instruments for trading or other speculative purposes. Derivatives are initially recognized at fair value on the date a derivative contract is entered into and are subsequently re-measured to their fair value at the end of each reporting period. All changes in the fair value of derivative instruments are recognized as other income (expense) in the Consolidated Statements of Income. The derivative instruments are not subject to master netting agreements and are not offset in the Consolidated Balance Sheets. We are exposed to risk from credit-related losses resulting from nonperformance by counterparties to our financial instruments. We perform credit evaluations of our counterparties under forward exchange contracts and expect all counterparties to meet their obligations. We have not experienced credit losses from our counterparties. As of March 31, 2023, the Company had 53 forward rate contracts outstanding.

Foreign Currency Hedging Agreement

On November 3, 2022, the Company entered into a Euro/U.S. forward contract arrangement (the “Initial Forward”) with Wells Fargo Bank, N.A. (the “Hedge Counterparty”). The Initial Forward, which is governed by the provisions of an ISDA Master Agreement (including schedules thereto and transaction confirmations that supplement such agreement) entered into between the Company and the Hedge Counterparty, enables the Company to convert a portion of its Euro denominated payment obligations under the DPLTA into U.S. Dollars. Under the Initial Forward, the Company agreed to exchange an aggregate notional amount of $160.0 million U.S. dollars for Euros at a daily fixed forward rate ranging from $0.98286 to $1.03290. The aggregate amount of $160.0 million is divided into eight quarterly tranches of $20.0 million, commencing in the fourth quarter of 2022. The Company, at its sole discretion, may exchange all or part of each tranche on any given day within the applicable quarter; provided, however, that it must exchange the full tranche by the end of such quarter. The Initial Forward may be accelerated or terminated early for a number of reasons, including but not limited to (i) non-payment by the Company or the Hedge Counterparty, (ii) breach of representation or warranty or covenant by either party or (iii) insolvency or bankruptcy of either party.

On March 21, 2023, the Company entered into a Euro/U.S. dollar forward contract arrangement (the “Forward”) with Wells Fargo Bank, N.A. (the “Hedge Counterparty”). Under the Forward, which is governed by the provisions of an ISDA Master Agreement (including schedules thereto and transaction confirmations that supplement such agreement) entered into between the Company and the Hedge Counterparty, the Company will exchange an aggregate notional amount of $160.0 million U.S. dollars for Euros at a daily fixed forward rate of $1.085 per €1.00 in average. During the three months ended March 31, 2023, the Company settled one $20.0 million forward contract tranche and the remaining will be divided into seven quarterly tranches of $20.0 million. These new forward contracts transacted on March 21, 2023 (to sell EUR/buy USD) were entered into for the purpose of unwinding the previously transacted forward contracts (to buy EUR/sell USD), transacted in November 2022. The drawdown dates of the original ratchet forwards are set to the same date as the maturity of the new offsetting forward contracts.

The fair values of the Company's derivative instruments recorded in the Condensed Consolidated Balance Sheet as of March 31, 2023 and December 31, 2022 were as follows:

 

(In thousands)

 

Balance Sheet Location

 

March 31, 2023

 

 

December 31, 2022

 

Derivatives Not Designated as Hedging Instruments (Level 2):

 

 

 

 

 

 

 

 

Foreign exchange contracts – derivative assets

 

Other receivables

 

$

11,831

 

 

$

11,992

 

Foreign exchange contracts – derivative liabilities

 

Accounts payable

 

$

(351

)

 

$

(633

)

Total derivatives

 

 

 

$

11,480

 

 

$

11,359

 

The change in the fair values of the Company's derivative instruments recorded in the Condensed Consolidated Statements of Income during the three months ended March 31, 2023 and 2022 were as follows:

 

 

 

 

 

Three Months Ended

 

 

 

 

 

March 31,

 

(In thousands)

 

Income Statement
Location

 

2023

 

 

2022

 

Derivatives Not Designated as Hedging Instruments:

 

 

 

 

 

 

 

 

Foreign exchange contracts

 

Other income (expense), net

 

$

(69

)

 

$

—

 

 

12. REVOLVING CREDIT AGREEMENTS

The carrying amounts of the Company's current and non-current revolving credit agreements in its Condensed Consolidated Balance Sheets were as follows:

 

 

 

(As restated)

 

 

 

 

 

 

As of

 

 

As of

 

(In thousands)

 

March 31, 2023

 

 

December 31, 2022

 

New Nord/LB revolving line of credit

 

$

10,843

 

 

$

—

 

Nord/LB revolving line of credit

 

 

—

 

 

 

16,091

 

Syndicated credit agreement working capital line of credit

 

 

—

 

 

 

10,727

 

DZ bank revolving line of credit

 

 

—

 

 

 

9,118

 

Total current revolving credit agreements

 

$

10,843

 

 

$

35,936

 

 

 

 

(As restated)

 

 

 

 

 

 

As of

 

 

As of

 

(In thousands)

 

March 31, 2023

 

 

December 31, 2022

 

Wells Fargo credit agreement

 

$

180,000

 

 

$

60,000

 

Total non-current revolving credit agreement

 

$

180,000

 

 

$

60,000

 

As of March 31, 2023, the weighted average interest rate on our revolving credit agreements was 6.2%.

Wells Fargo Credit Agreement

On July 18, 2022, ADTRAN Holdings, Inc. and ADTRAN, Inc., as the borrower, entered into a credit agreement with a syndicate of banks, including Wells Fargo Bank, National Association, as administrative agent (“Administrative Agent”), and the other lenders named therein (the “Credit Agreement”). The Credit Agreement allowed for borrowings of up to $100 million in aggregate principal amount, but the borrowings increased to up to $400 million in aggregate principal amount upon the DPLTA becoming effective on January 16, 2023.

The Credit Agreement replaced the Cadence Revolving Credit Agreement and the Wells Fargo Revolving Credit Agreement. In connection with the entry into the Credit Agreement, all outstanding borrowings under such credit agreements have been repaid and the agreements terminated.

As of March 31, 2023, ADTRAN, Inc.’s borrowings under the revolving line of credit were $180.0 million. In addition, we may issue up to $25.0 million in letters of credit against our $400.0 million total facility. As of March 31, 2023, we had a total of $3.4 million in letters of credit under ADTRAN, Inc. outstanding against our eligible borrowings, leaving a net amount of $216.6 million available for future borrowings. Any future credit extensions under the Credit Agreement are subject to customary conditions precedent. The proceeds of any loans are expected to be used for general corporate purposes and to pay a portion of the Exchange Offer consideration. The Credit Agreement matures in July 2027 but provides the Company with an option to request extensions subject to customary conditions.

All U.S. borrowings under the Credit Agreement (other than swingline loans, which will bear interest at the Base Rate (as defined below)) will bear interest, at the Company’s option, at a rate per annum equal to (A)(i) the highest of (a) the federal funds rate (i.e., for any day, the rate per annum equal to the weighted average of the rates on overnight federal funds transactions with members of the Federal Reserve System, as published by the Federal Reserve Bank of New York on the business day next succeeding such day) plus ½ of 1%, (b) the prime commercial lending rate of the Administrative Agent, as established from time to time at its principal U.S. office (which such rate is an index or base rate and will not necessarily be its lowest or best rate charged to its customers or other banks), and (c) the daily Adjusted Term SOFR (as defined in the Credit Agreement) for a one-month tenor plus 1%, plus (ii) the applicable rate, ranging from 0.5% to 1.25% (the “Base Rate”), or (B) the sum of the Adjusted Term SOFR (as defined in the Credit Agreement) plus the applicable rate, ranging from 1.4% to 2.15%, provided that such sum is subject to a 0.0% floor (such loans utilizing this interest rate, “SOFR Loans”). All E.U. borrowings under the Credit Agreement (other than swingline loans) will bear interest at a rate per annum equal to the sum of the Euro Interbank Offered Rate as administered by the European Money Markets Institute (or a comparable or successor administrator approved by the Administrative Agent) plus the applicable rate, ranging from 1.5% to 2.25%, provided that such sum is subject to a 0.0% floor (such loans utilizing this interest rate, “EURIBOR Loans”). The applicable rate is based on the consolidated net leverage ratio of the Company and its subsidiaries as determined pursuant to the terms of the Credit Agreement. Default interest is 2.00% per annum in excess of the rate otherwise applicable in the case of any overdue principal or any other overdue amount.

In addition to paying interest on outstanding principal under the Credit Agreement, the Company is required to pay a commitment fee to the lenders under the Credit Agreement in respect of unutilized revolving loan commitments and an additional commitment ticking fee at a rate of 0.25% on the commitment amounts of each lender until the earliest of (i) the date of the Senior Credit Facilities Increase, (ii) the Company’s voluntary termination of the credit facility commitment, and (iii) December 31, 2023. The Company is also required

to pay a participation fee to the Administrative Agent for the account of each lender with respect to the Company’s participation in letters of credit at the then applicable rate for SOFR Loans.

The Credit Agreement permits the Company to prepay any or all of the outstanding loans or to reduce the commitments under the Credit Agreement without incurring premiums or penalties (except breakage costs with respect to SOFR Loans and EURIBOR Loans). The Credit Agreement contains customary affirmative and negative covenants, including incurrence covenants and certain other limitations on the ability of the Company and the Company’s subsidiaries to incur additional debt, guarantee other obligations, grant liens on assets, make investments, dispose of assets, pay dividends or other payments on capital stock, make restricted payments, engage in mergers or consolidations, engage in transactions with affiliates, modify its organizational documents, and enter into certain restrictive agreements. It also contains customary events of default (subject to customary cure periods and materiality thresholds). Furthermore, the Credit Agreement requires that the consolidated total net leverage ratio (as defined in the Credit Agreement) of the Company and its subsidiaries tested on the last day of each fiscal quarter not exceed 3.25 to 1.0 through September 30, 2024 and 2.75 to 1.00 from December 31, 2024 and thereafter, subject to certain exceptions. The Credit Agreement also requires that the consolidated interest coverage ratio (as defined in the Credit Agreement) of the Company and its subsidiaries tested on the last day of each fiscal quarter not fall below 3.00 to 1.00. As of March 31, 2023, the Company was in compliance with all material covenants.

Finally, pursuant to a Collateral Agreement, dated as of July 18, 2022, among the Company, ADTRAN, Inc. and the Administrative Agent, ADTRAN, Inc.’s obligations under the Credit Agreement are secured by substantially all of the assets of ADTRAN, Inc. and the Company. In addition, the Company has guaranteed ADTRAN, Inc.’s obligations under the Credit Agreement pursuant to a Guaranty Agreement, dated as of July 18, 2022, by ADTRAN, Inc. and the Company in favor of the Administrative Agent.

New Nord/LB Revolving Line of Credit

On March 29, 2023, ADVA entered into a $16.1 million unsecured revolving line of credit with Norddeutsche Landesbark - Girozentrale (Nord/LB) that bears interest of Euro Short Term Rate plus 1.94%. The line of credit has a perpetual term that can be terminated by the Company or Nord/LB at any time. As of March 31, 2023, ADVA borrowed $10.8 million under this facility.

Nord/LB Revolving Line of Credit

On August 8, 2022, ADVA entered into a $16.1 million revolving line of credit with Norddeutsche Landesbark - Girozentrale (Nord/LB) that bears interest of Euro Short Term Rate plus 1.4% and which matures in August 2023. On January 31, 2023, the Company repaid the outstanding borrowings under the Nord/LB revolving line of credit. No amounts are available for future borrowings.

Syndicated Credit Agreement Working Capital Line of Credit

In September 2018, ADVA entered into a syndicated credit agreement with Bayerische Landesbank and Deutsche Bank AG Branch German Business to borrow up to $10.7 million as part of a working capital line of credit. On January 31, 2023, the Company repaid the outstanding borrowings under the syndicated credit agreement working capital line of credit. No amounts are available for future borrowings.

DZ Bank Revolving Line of Credit

In the fourth quarter of 2022, ADVA entered into a revolving line of credit with DZ Bank to borrow up to $9.1 million. Interest on the line of credit reset monthly based on renewal of the loan and was 2.8% at the time the loan was repaid. On March 12, 2023, the Company repaid the outstanding borrowings under the DZ Bank revolving line of credit. No amounts are available for future borrowings.

13. NOTES PAYABLE

The carrying amounts of the Company's notes payable in its Condensed Consolidated Balance Sheets were as follows:

 

 

 

Fair Value as of

 

 

Carrying Value as of

 

 

Carrying Value as of

 

(In thousands)

 

March 31, 2023

 

 

March 31, 2023

 

 

December 31, 2022

 

Syndicated credit agreement notes payable

 

$

—

 

 

$

—

 

 

$

24,598

 

Total Notes Payable

 

$

—

 

 

$

—

 

 

$

24,598

 

Syndicated Credit Agreement Note Payable

In September 2018, ADVA entered into a syndicated credit agreement with Bayerische Landesbank and Deutsche Bank AG Branch German Business to borrow $63.7 million. On January 31, 2023, the Company repaid the outstanding borrowings under the syndicated credit agreement note payable. No amounts are available for future borrowings.

 

14. EMPLOYEE BENEFIT PLANS

We maintain a defined benefit pension plan covering employees in certain foreign countries.

In connection with the Business Combination, we acquired $29.6 million of additional obligations and $22.3 million of assets related to post-employment benefit plans for certain groups of employees at our new operations outside of the U.S. Plans vary depending on the legal, economic, and tax environments of the respective country. For defined benefit plans, accruals for pensions and similar commitments have been included in the results for this year. The new defined benefit plans are for employees in Switzerland, Italy, Israel and India:

•
In Switzerland, there are two defined benefit pension plans. Both plans provide benefits in the event of retirement, death or disability. The plan's benefits are based on age, years of service, salary and on a participants old age account. The plans are financed by contributions paid by the participants and by the Company.
•
In Italy, the post-employment benefit plan is required due to statutory provisions. The plan is financed directly by the Company on a pay as you go basis. Employees receive their pension payments as a function of salary, inflation and a notional account.
•
In Israel, there is a defined benefit pension plan that provides benefits in the event of a participant being dismissed involuntarily, retirement or death. The plan's benefits are based on the higher of the severance benefit required by law or the cash surrender value of the severance benefit component of any qualifying insurance policy or long-term employee benefit fund that is registered in the participants' name. The plan is financed by contributions paid by the Company.
•
In India, the post-employment benefit plan is required due to statutory provisions. The plan is financed directly by the Company on a pay as you go basis.

The Company's net pension liability totaled $10.7 million and $10.6 million as of March 31, 2023 and December 31, 2022, respectively.

The following table summarizes the components of net periodic pension cost related to a defined benefit pension plan covering employees in certain foreign countries:

 

 

 

Three Months Ended

 

 

 

March 31,

 

(In thousands)

 

2023

 

 

2022

 

Service cost

 

$

398

 

 

$

257

 

Interest cost

 

 

(32

)

 

 

222

 

Expected return on plan assets

 

 

58

 

 

 

(470

)

Amortization of actuarial losses

 

 

6

 

 

 

89

 

Net periodic pension cost

 

$

430

 

 

$

98

 

 

The components of net periodic pension cost, other than the service cost component, are included in other income, net in the Condensed Consolidated Statements of Loss. Service cost is included in cost of revenue, selling, general and administrative expenses and research and development expenses in the Condensed Consolidated Statements of Loss. The Company made contributions to the defined benefit pension plans totaling $1.0 million and $0.5 million during the three months ending March 31, 2023 and 2022, respectively. Contributions to the defined benefit pension plans for the remainder of 2023 will be limited to benefit payments to retirees which are paid out of the operating cash flows of the Company and are expected to be approximately $3.3 million.

15. EQUITY

Accumulated Other Comprehensive Income (Loss)

The following tables present the changes in accumulated other comprehensive income (loss), net of tax, by component:

 

 

Three Months Ended March 31, 2023

 

(In thousands)

 

Unrealized
(Losses) Gains
on
Available-
for-Sale
Securities

 

 

Defined
Benefit Plan
Adjustments

 

 

Foreign
Currency
Adjustments

 

 

ASU 2018-02 Adoption

 

 

Total

 

Balance as of December 31, 2022

 

$

(836

)

 

$

(1,016

)

 

$

48,180

 

 

$

385

 

 

$

46,713

 

Other comprehensive income before
   reclassifications

 

 

83

 

 

 

—

 

 

 

8,678

 

 

 

—

 

 

 

8,761

 

Amounts reclassified from accumulated other
   comprehensive (loss) income

 

 

(14

)

 

 

35

 

 

 

—

 

 

 

—

 

 

 

21

 

Net current period other comprehensive income

 

 

69

 

 

 

35

 

 

 

8,678

 

 

 

—

 

 

 

8,782

 

Less: Comprehensive income attributable to non-controlling interest, net of tax

 

 

—

 

 

 

—

 

 

 

244

 

 

 

—

 

 

 

244

 

Balance as of March 31, 2023

 

$

(767

)

 

$

(981

)

 

$

56,614

 

 

$

385

 

 

$

55,251

 

 

 

 

Three Months Ended March 31, 2022

 

(In thousands)

 

Unrealized
(Losses)
Gains
on
Available-
for-Sale
Securities

 

 

Defined
Benefit Plan
Adjustments

 

 

Foreign
Currency
Adjustments

 

 

ASU 2018-02 Adoption

 

 

Total

 

Balance as of December 31, 2021

 

$

(552

)

 

$

(5,613

)

 

$

(6,134

)

 

$

385

 

 

$

(11,914

)

Other comprehensive loss before
   reclassifications

 

 

(975

)

 

 

—

 

 

 

(905

)

 

 

—

 

 

 

(1,880

)

Amounts reclassified from accumulated other
   comprehensive income (loss)

 

 

251

 

 

 

(13

)

 

 

—

 

 

 

—

 

 

 

238

 

Net current period other comprehensive income (loss)

 

 

(724

)

 

 

(13

)

 

 

(905

)

 

 

—

 

 

 

(1,642

)

Balance as of March 31, 2022

 

$

(1,276

)

 

$

(5,626

)

 

$

(7,039

)

 

$

385

 

 

$

(13,556

)

 

 

The following tables present the details of reclassifications out of accumulated other comprehensive loss:

 

 

 

Three Months Ended March 31, 2023

(In thousands)

 

Amount
Reclassified
from
Accumulated
Other
Comprehensive
(Loss) Income

 

 

Affected Line Item in the
Statement Where Net
(Loss) Income Is Presented

Unrealized gain (loss) on available-for-sale securities:

 

 

 

 

 

Net realized gain on sales of securities

 

$

18

 

 

Net investment (loss) gain

Defined benefit plan adjustments – actuarial loss

 

 

(51

)

 

(1)

Total reclassifications for the period, before tax

 

 

(33

)

 

 

Tax benefit

 

 

12

 

 

 

Total reclassifications for the period, net of tax

 

$

(21

)

 

 

 

(1)
A part of the computation of net periodic pension cost, which is included in other income, net in the Condensed Consolidated Statements of Loss.

 

 

Three Months Ended March 31, 2022

(In thousands)

 

Amount
Reclassified
from
Accumulated
Other
Comprehensive
(Loss) Income

 

 

Affected Line Item in the
Statement Where Net
(Loss) Income Is Presented

Unrealized gain (loss) on available-for-sale securities:

 

 

 

 

 

Net realized loss on sales of securities

 

$

(330

)

 

Net investment (loss) gain

Defined benefit plan adjustments – actuarial gain

 

 

19

 

 

(1)

Total reclassifications for the period, before tax

 

 

(311

)

 

 

Tax benefit

 

 

73

 

 

 

Total reclassifications for the period, net of tax

 

$

(238

)

 

 
(1)
A part of the computation of net periodic pension cost, which is included in other income, net in the Condensed Consolidated Statements of Loss.

 

The following table presents the tax effects related to the change in each component of other comprehensive income (loss):

 

 

Three Months Ended

 

 

Three Months Ended

 

 

 

March 31, 2023

 

 

March 31, 2022

 

(In thousands)

 

Before-Tax
Amount

 

 

Tax
(Expense)
Benefit

 

 

Net-of-Tax
Amount

 

 

Before-Tax
Amount

 

 

Tax
(Expense)
Benefit

 

 

Net-of-Tax
Amount

 

Unrealized gain (loss) on available-for-sale
   securities

 

$

109

 

 

$

(26

)

 

$

83

 

 

$

(1,283

)

 

$

308

 

 

$

(975

)

Reclassification adjustment for amounts related to
   available-for-sale investments included in net (loss) gain

 

 

(18

)

 

 

4

 

 

 

(14

)

 

 

330

 

 

 

(79

)

 

 

251

 

Reclassification adjustment for amounts related to
   defined benefit plan adjustments included in net (loss) gain

 

 

51

 

 

 

(16

)

 

 

35

 

 

 

(19

)

 

 

6

 

 

 

(13

)

Foreign currency translation adjustments

 

 

8,678

 

 

 

—

 

 

 

8,678

 

 

 

(905

)

 

 

—

 

 

 

(905

)

Total Other Comprehensive Income (Loss)

 

$

8,820

 

 

$

(38

)

 

$

8,782

 

 

$

(1,877

)

 

$

235

 

 

$

(1,642

)

 

16. REDEEMABLE NON-CONTROLLING INTEREST

The following table summarizes the redeemable non-controlling interest activity for the three months ended March 31, 2023:

 

 

 

Three Months Ended

 

(In thousands)

 

March 31, 2023

 

Balance at beginning of period

 

$

—

 

Reclassification of non-controlling interests

 

 

443,757

 

Redemption of redeemable non-controlling interest

 

 

(1,519

)

Net income attributable to redeemable non-controlling interests

 

 

2,809

 

Annual recurring compensation earned

 

 

(2,809

)

Translation adjustment

 

 

430

 

Balance as of March 31, 2023

 

$

442,668

 

Annual Recurring Compensation payable on untendered outstanding shares under the DPLTA must be recognized as it accrues. For the three months ended March 31, 2023, we have recognized $2.8 million representing the current quarter's portion of the annual dividend to the redeemable non-controlling shareholders, which will be paid annually after the ordinary general shareholders' meeting of ADVA beginning in 2024.

17. LOSS PER SHARE

The calculation of basic and diluted loss per share is as follows:

 

 

 

Three Months Ended

 

 

 

March 31,

 

(In thousands, except per share amounts)

 

2023

 

 

2022

 

Numerator

 

 

 

 

 

 

Net loss attributable to ADTRAN Holdings, Inc.

 

$

(34,464

)

 

$

(1,127

)

Denominator

 

 

 

 

 

 

Weighted average number of shares – basic

 

 

78,358

 

 

 

49,113

 

Effect of dilutive securities

 

 

 

 

 

 

Stock options

 

 

—

 

 

 

—

 

PSUs, RSUs and restricted stock

 

 

—

 

 

 

—

 

Weighted average number of shares – diluted

 

 

78,358

 

 

 

49,113

 

Loss per share attributable to ADTRAN Holdings, Inc. – basic

 

$

(0.44

)

 

$

(0.02

)

Loss per share attributable to ADTRAN Holdings, Inc. – diluted

 

$

(0.44

)

 

$

(0.02

)

For the three months ended March 31, 2023 and 2022, 0.1 million and five thousand shares, respectively, of unvested PSUs, RSUs and restricted stock were excluded from the calculation of diluted earnings per share due to their anti-dilutive effect.

For the three months ended March 31, 2023 and 2022, 0.4 million and 0.1 million stock options, respectively, were outstanding but were not included in the computation of diluted earnings per share. These stock options were excluded because their exercise prices were greater than the average market price of the common shares during the applicable period, making them anti-dilutive under the treasury stock method.

18. SEGMENT INFORMATION

The chief operating decision maker regularly reviews the Company’s financial performance based on two reportable segments: (1) Network Solutions and (2) Services & Support.

The Network Solutions segment includes hardware and software products that enable a digital future which support the Company's Subscriber, Access and Aggregation, and Optical Networking Solutions. The Company's cloud-managed Wi-Fi gateways, virtualization software, and switches provide a mix of wired and wireless connectivity at the customer premises. In addition, its Carrier Ethernet products support a variety of applications at the network edge ranging from mobile backhaul to connecting enterprise customers (“Subscriber Solutions"). The Company's portfolio includes products for multi-gigabit service delivery over fiber or alternative media to homes and businesses.

The Services & Support segment offers a comprehensive portfolio of network design, implementation, maintenance and cloud-hosted services supporting its Subscriber, Access and Aggregation, and Optical Networking Solutions. These services assist operators in the deployment of multi-vendor networks while reducing their cost to maintain these networks. The cloud-hosted services include a suite of SaaS applications under the Company's Mosaic One platform that manages end-to-end network and service optimization for both fiber access infrastructure and mesh Wi-Fi connectivity. The Company backs these services with a global support organization that offers on-site and off-site support services with varying SLAs.

The performance of these segments is evaluated based on revenue, gross profit and gross margin; therefore, selling, general and administrative expenses, research and development expenses, interest and dividend income, interest expense, net investment (loss) gain, other income (loss), net and income tax benefit (expense) are reported on a Company-wide basis only. There is no inter-segment revenue. Asset information by reportable segment is not produced and, therefore, is not reported.

The following table presents information about the revenue and gross profit of its reportable segments:

 

 

Three Months Ended

 

 

 

March 31, 2023

 

 

March 31, 2022

 

(In thousands)

 

Revenue

 

 

Gross Profit

 

 

Revenue

 

 

Gross Profit

 

Network Solutions

 

$

282,418

 

 

$

63,288

 

 

$

138,374

 

 

$

47,721

 

Services & Support

 

 

41,494

 

 

 

24,520

 

 

 

16,144

 

 

 

6,595

 

Total

 

$

323,912

 

 

$

87,808

 

 

$

154,518

 

 

$

54,316

 

 

For the three months ended March 31, 2023 and 2022, $1.5 million and $0.2 million, respectively, of depreciation expense was included in gross profit for our Network Solutions segment. For the three months ended March 31, 2023 and 2022, $2 thousand and $3 thousand, respectively, of depreciation expense was included in gross profit for our Services & Support segment.

Revenue by Category

In addition to its reportable segments, revenue is also reported for the following three categories – Subscriber Solutions, Access & Aggregation Solutions, and Optical Networking Solutions.

Prior to the Business Combination with ADVA on July 15, 2022, ADTRAN reported revenue across the following three categories: (1) Access & Aggregation, (2) Subscriber Solutions & Experience and (3) Traditional & Other Products. Following the Business Combination with ADVA, the Company has recast these revenues such that ADTRAN’s former Access & Aggregation revenue is combined with a portion of the applicable ADVA solutions to create Access & Aggregation Solutions, ADTRAN’s former Subscriber Solutions & Experience revenue is combined with a portion of the applicable ADVA solutions to create Subscriber Solutions, and the revenue from Traditional & Other products is now included in the applicable Access & Aggregation Solutions or Subscriber Solutions category. Optical Networking Solutions is a new revenue category added to represent a meaningful portion of ADVA’s portfolio.

Our Subscriber Solutions portfolio is used by Service Providers to terminate their access services infrastructure at the customer premises while providing an immersive and interactive experience for residential, business and wholesale subscribers. This revenue category includes hardware- and software-based products and services. These solutions include fiber termination solutions for residential, business and wholesale subscribers, Wi-Fi access solutions for residential and business subscribers, Ethernet switching and network edge virtualization solutions for business subscribers, and cloud software solutions covering a mix of subscriber types.

Our Access & Aggregation Solutions are solutions that are used by communications Service Providers to connect residential subscribers, business subscribers and mobile radio networks to the Service Providers’ metro network, primarily through fiber-based connectivity. This revenue category includes hardware- and software-based products and services. Our solutions within this category are a mix of fiber access and aggregation platforms, precision network synchronization and timing solutions, and access orchestration solutions that ensure highly reliable and efficient network performance.

Our Optical Networking Solutions are used by communications Service Providers, internet content providers and large-scale enterprises to securely interconnect metro and regional networks over fiber. This revenue category includes hardware- and software-based products and services. Our solutions within this category include open optical terminals, open line systems, optical subsystems and modules, network infrastructure assurance systems, and automation platforms that are used to build high-scale, secure and assured optical networks.

The table below presents revenue information by category. Prior year amounts presented below have been reclassified to conform to the current period revenue category presentation:

 

 

Three Months Ended

 

 

 

March 31,

 

(In thousands)

 

2023

 

 

2022

 

Subscriber Solutions

 

$

79,336

 

 

$

56,722

 

Access & Aggregation Solutions

 

 

96,820

 

 

 

97,796

 

Optical Networking Solutions

 

 

147,756

 

 

 

—

 

Total

 

$

323,912

 

 

$

154,518

 

 

Revenue by Geographic Area

 

The following table presents revenue information by geographic area:

 

 

 

Three Months Ended

 

 

 

March 31,

 

(In thousands)

 

2023

 

 

2022

 

United States

 

$

131,466

 

 

$

99,048

 

Germany

 

 

76,286

 

 

 

10,920

 

United Kingdom

 

 

57,397

 

 

 

30,388

 

Other international

 

 

58,763

 

 

 

14,162

 

Total

 

$

323,912

 

 

$

154,518

 

 

19. LIABILITY FOR WARRANTY RETURNS

The Company's products generally include warranties of 90 days to five years for product defects. The Company accrues for warranty returns at the time of product shipment based on its historical return rate and estimate of the cost to repair or replace the defective products. The Company engages in extensive product quality programs and processes, including actively monitoring and evaluating the quality of its component suppliers. The increasing complexity of the Company's products may cause warranty incidences, when they arise, to be more costly. Estimates regarding future warranty obligations may change due to product failure rates, material usage and other rework costs incurred in correcting a product failure. In addition, from time to time, specific warranty accruals may be recorded if unforeseen problems arise. Should the Company's actual experience relative to these factors be worse than its estimates, the Company will be required to record additional warranty expense. The liability for warranty obligations totaled $7.2 million and $7.2 million as of March 31, 2023 and December 31, 2022, respectively, and is included in accrued expenses and other liabilities in the Condensed Consolidated Balance Sheets. The warranty expense and write-off activity for the three months ended March 31, 2023 and 2022 are summarized as follows:

 

 

 

Three Months Ended

 

 

 

March 31,

 

(In thousands)

 

2023

 

 

2022

 

Balance at beginning of period

 

$

7,196

 

 

$

5,403

 

Plus: Amounts charged to cost and expenses

 

 

1,077

 

 

 

344

 

Plus: Foreign currency translation adjustments

 

 

26

 

 

 

—

 

Less: Deductions

 

 

(1,099

)

 

 

(604

)

Balance at end of period

 

$

7,200

 

 

$

5,143

 

20. COMMITMENTS AND CONTINGENCIES

Legal Matters

From time to time the Company is subject to or otherwise involved in various lawsuits, claims, investigations and legal proceedings that arise out of or are incidental to the conduct of our business (collectively, “Legal Matters”), including those relating to employment matters, patent rights, regulatory compliance matters, stockholder claims, and contractual and other commercial disputes. Such Legal Matters, even if not meritorious, could result in the expenditure of significant financial and managerial resources. Additionally, an unfavorable outcome in a legal matter, including in a patent dispute, could require the Company to pay damages, entitle claimants to other relief, such as royalties, or could prevent the Company from selling some of its products in certain jurisdictions. At this time, the Company is unable to predict the outcome of or estimate the possible loss or range of loss, if any, associated with such legal matters.

DPLTA Exit Costs

Pursuant to the terms of the DPLTA, each ADVA shareholder (other than the Company) has received an offer to elect either (1) to remain an ADVA shareholder and receive from us an Annual Recurring Compensation payment, or (2) to receive Exit Compensation. Assuming all of the minority holders of currently outstanding ADVA shares were to elect the second option, we are obligated to make aggregate Exit Compensation payments of approximately EUR 309.5 million or approximately $335.6 million, based on an exchange rate as of March 31, 2023. Shareholders electing the first option of Annual Recurring Compensation may later elect the second option. The opportunity for outside ADVA shareholders to tender ADVA shares in exchange for Exit Compensation had been scheduled to expire on March 16, 2023. However, due to the appraisal proceedings that have been initiated in accordance with applicable German law, this time period for tendering shares has been extended pursuant to the German Stock Corporation Act (Aktiengesetz) and will end two months after the date on which a final decision in such appraisal proceedings has been published in the Federal Gazette (Bundesanzeiger).

Our obligation to pay Annual Recurring Compensation under the DPLTA is a continuing payment obligation, which will amount to approximately EUR 10.5 million or $11.3 million (based on the current exchange rate) per year assuming none of the minority ADVA shareholders were to elect Exit Compensation. The foregoing amounts do not reflect any potential increase in payment obligations that we may have depending on the outcome of ongoing appraisal proceedings in Germany. During the three months ended March 31, 2023, we accrued $2.8 million in Annual Recurring Compensation, which was reflected as a reduction to retained earnings.

Performance Bonds

Certain contracts, customers and jurisdictions in which we do business require us to provide various guarantees of performance such as bid bonds, performance bonds and customs bonds. As of March 31, 2023 and December 31, 2022, we had commitments related to these bonds totaling $11.7 million and $22.0 million, respectively, which expire at various dates through April 2031. In general, we would only be liable for the amount of these guarantees in the event of default under each contract, the probability of which we believe is remote.

Purchase Commitments

The Company purchases components from a variety of suppliers and use contract manufacturers to provide manufacturing services for our products. Our inventory purchase commitments are for short-term product manufacturing requirements as well as for commitments to suppliers to secure manufacturing capacity. Certain of our inventory purchase commitments with contract manufacturers and suppliers relate to arrangements to secure supply and pricing for certain product components for multi-year periods. As of March 31, 2023, purchase commitments totaled $459.3 million.

21. RESTRUCTURING

During the fourth quarter of 2022, the Company initiated a restructuring program designed to optimize the assets and business processes, and information technology systems of the Company in relation to the Business Combination with ADVA. The restructuring program is expected to maximize cost synergies by realizing operation scale, combining sales channels, streamlining corporate and general and administrative functions, including human capital resources and combining sourcing and production costs.

In February 2019, the Company announced the restructuring of a certain portion of its workforce predominantly in Germany, which included the closure of the Company’s office location in Munich, Germany accompanied by relocation or severance benefits for the affected employees. Voluntary early retirement was offered to certain other employees and was announced in March 2019 and again in August 2020. This plan was completed in 2021 and all amounts were paid in 2022.

A reconciliation of the beginning and ending restructuring liability, which is included in accrued wages and benefits in the Condensed Consolidated Balance Sheets as of March 31, 2023 and December 31, 2022, is as follows:

 

 

 

Three Months Ended

 

(In thousands)

 

March 31, 2023

 

Balance at beginning of period

 

$

159

 

Plus: Amounts charged to cost and expense

 

 

2,437

 

Less: Amounts paid

 

 

(1,574

)

Balance as of March 31, 2023

 

$

1,022

 

 

 

 

For the Year Ended

 

(In thousands)

 

December 31, 2022

 

Balance as of December 31, 2021

 

$

1,514

 

Plus: Amounts charged to cost and expense

 

 

1,629

 

Less: Amounts paid

 

 

(2,984

)

Balance as of December 31, 2022

 

$

159

 

Restructuring expenses included in the Condensed Consolidated Statements of (Loss) Income are for the three months ended March 31, 2023 and 2022:

 

 

 

Three Months Ended

 

 

 

March 31,

 

(In thousands)

 

2023

 

 

2022

 

 

 

 

 

 

 

 

   Network Solutions - Cost of revenue

 

$

58

 

 

$

—

 

   Services & Support - Cost of revenue

 

 

18

 

 

 

—

 

Cost of revenue

 

$

76

 

 

$

—

 

Selling, general and administrative expenses (1)

 

 

2,180

 

 

 

2

 

Research and development expenses (1)

 

 

181

 

 

 

—

 

Total restructuring expenses

 

$

2,437

 

 

$

2

 

 

 

The following table represents the components of restructuring expense by geographic area for the three months ended March 31, 2023 and 2022:

 

 

 

Three Months Ended

 

 

 

March 31,

 

(In thousands)

 

2023

 

 

2022

 

United States

 

$

1,119

 

 

$

2

 

International

 

 

1,318

 

 

 

—

 

Total restructuring expenses

 

$

2,437

 

 

$

2

 

 

22. SUBSEQUENT EVENTS

Dividend Approval

On May 8, 2023, the Company announced that its Board of Directors declared a quarterly cash dividend of $0.09 per common share to be paid to the Company’s stockholders of record as of the close of business on May 23, 2023. The payment date will be June 6, 2023 in the aggregate amount of approximately $7.1 million.

Appointment of Ulrich Dopfer as Principal Accounting Officer

As previously disclosed on the Company’s Form 8-K filed on March 30, 2023, Michael Foliano, formerly Senior Vice President of Finance and Chief Financial Officer of the Company, notified the Company of his intent to retire, effective June 28, 2023. Mr. Foliano served in his role as Chief Financial Officer of the Company through April 30, 2023. In connection with his transition, the Board of Directors appointed Ulrich Dopfer as Senior Vice President and Chief Financial Officer of the Company, effective May 1, 2023; however, Mr. Foliano continued to serve as the Company’s “principal accounting officer” within the meaning of the rules of the SEC under the Exchange Act (the “Principal Accounting Officer”), and as the Company’s Treasurer and Secretary. On May 10, 2023, the Board of Directors removed Mr. Foliano from such roles, designated Mr. Dopfer as the Company’s Principal Accounting Officer, and elected Mr. Dopfer as Treasurer and Secretary of the Company, effective as of such date.

ADVA Legal Matter

On May 8, 2023, ADVA and its U.S. subsidiary, ADVA Optical Networking North America Inc., filed a lawsuit in the U.S District Court for the Eastern District of Texas against Huawei Technologies Co. Ltd (“Huawei”) seeking a declaration from the court that Huawei violated contractual commitments to negotiate in good faith and to license patents, to the extent any patents are practiced by ADVA, on Fair, Reasonable and Non-Discriminatory (“FRAND”) terms and conditions. The case also seeks to obtain a ruling by the court that ADVA has complied with its own commitments and requests that the Court establish FRAND terms and conditions for obtaining a FRAND license on any standard essential patents that ADVA does in fact practice. The lawsuit also seeks to enjoin Huawei from enforcing certain of its patents against ADVA and its affiliates in other jurisdictions, and includes allegations by ADVA that it does not infringe five Huawei patents and that Huawei has infringed an ADVA patent. Huawei has not yet filed an answer in this matter. Given the current status of this matter, the Company is unable predict the outcome of or estimate the possible loss or range of loss, if any, associated with such legal matters.

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion should be read in conjunction with the Condensed Consolidated Financial Statements and the related notes that appear in Part I, Item 1 of this document. In addition, the following discussion should be read in conjunction with our audited consolidated financial statements for the year ended December 31, 2022, Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, Part I, Item 1, Business, and Item 1A, Risk Factors, included in our Annual Report on Form 10-K/A for the year ended December 31, 2022, filed with the SEC on August 14, 2023 (the "2022 Form 10-K/A), which is available free of charge on the SEC’s website at http://www.sec.gov and on our website at www.adtran.com.

This discussion is designed to provide the reader with information that will assist in understanding our Condensed Consolidated Financial Statements, the changes in certain key items in those financial statements from period to period, and the primary factors that accounted for those changes, as well as how certain accounting principles affect our Condensed Consolidated Financial Statements. See “Cautionary Note Regarding Forward-Looking Statements” on page 3 of this Amendment No. 1 for a description of important factors that could cause actual results to differ from expected results. See also Part 1, Item 1A, Risk Factors, of the 2022 Form 10‑K/A and Part II, Item 1A, Risk Factors of this Amendment No. 1.

Unless the context otherwise indicates or requires, references in this Amendment No. 1 to "ADTRAN", the “Company,” “we,” “us” and “our” refer to ADTRAN Holdings, Inc. and its consolidated subsidiaries for periods subsequent to the Merger and to ADTRAN, Inc. and its consolidated subsidiaries for periods prior to the Merger. The prior period results do not include the results of ADVA prior to the closing of the Business Combination.

OVERVIEW

The Company is a leading global provider of networking and communications platforms, software, systems and services focused on the broadband access market, serving a diverse domestic and international customer base in multiple countries that includes Tier-1, -2 and -3 Service Providers, alternative Service Providers, such as utilities, municipalities and fiber overbuilders, cable/MSOs, SMBs and distributed enterprises. Our innovative solutions and services enable voice, data, video and internet-communications across a variety of network infrastructures and are currently in use by millions worldwide. We support our customers through our direct global sales organization and our distribution networks. Our success depends upon our ability to increase unit volume and market share through the introduction of new products and succeeding generations of products having optimal selling prices and increased functionality as compared to both the prior generation of a product and the products of competitors in order to gain market share. To service our customers and grow revenue, we are continually conducting research and developing new products addressing customer needs and testing those products for the specific requirements of the particular customers. We offer a broad portfolio of flexible software and hardware network solutions and services that enable Service Providers to meet today’s service demands while enabling them to transition to the fully converged, scalable, highly-automated, cloud-controlled voice, data, internet and video network of the future. In addition to our global headquarters in Huntsville, Alabama, and our European headquarters in Munich, Germany, we have sales, administrative and research and development facilities in strategic global locations.

ADTRAN Holdings, Inc. solely owns ADTRAN, Inc. and is the majority shareholder of ADVA Optical Networking SE ("ADVA"). ADTRAN is a leading global provider of open, disaggregated networking and communications solutions. ADVA is a global provider of network solutions for data, storage, voice and video services. The combined technology portfolio can best address current and future requirements, especially regarding the convergence of solutions at the network edge.

The chief operating decision maker regularly reviews the Company’s financial performance based on two reportable segments: (1) Network Solutions and (2) Services & Support. In addition to the Company's reportable segments, revenue is also reported for the following three categories – Subscriber Solutions, Access & Aggregation Solutions, and Optical Networking Solutions.

Prior to the Business Combination with ADVA on July 15, 2022, ADTRAN reported revenue across the following three categories: (1) Access & Aggregation, (2) Subscriber Solutions & Experience and (3) Traditional & Other Products. Following the Business Combination with ADVA, we have recast these revenues such that ADTRAN’s former Access & Aggregation revenue is combined with a portion of the applicable ADVA solutions to create Access & Aggregation Solutions, ADTRAN’s former Subscriber Solutions & Experience revenue is combined with a portion of the applicable ADVA solutions to create Subscriber Solutions and the revenue from Traditional & Other products is now included in the applicable Access & Aggregation Solutions or Subscriber Solutions category. Optical Networking Solutions is a new revenue category added to represent a meaningful portion of ADVA’s portfolio.

Our Subscriber Solutions portfolio is used by Service Providers to terminate their access services infrastructure at the customer premises while providing an immersive and interactive experience for residential, business and wholesale subscribers. This revenue category includes hardware- and software-based products and services. These solutions include fiber termination solutions for residential, business and wholesale subscribers, Wi-Fi access solutions for residential and business subscribers, Ethernet switching and network edge virtualization solutions for business subscribers and cloud software solutions covering a mix of subscriber types.

Our Access & Aggregation Solutions are solutions that are used by communications Service Providers to connect residential subscribers, business subscribers and mobile radio networks to the Service Providers’ metro network, primarily through fiber-based connectivity. This revenue category includes hardware- and software-based products and services. Our solutions within this category are a mix of fiber access and aggregation platforms, precision network synchronization and timing solutions and access orchestration solutions that ensure highly reliable and efficient network performance.

Our Optical Networking Solutions are used by communications Service Providers, internet content providers and large-scale enterprises to securely interconnect metro and regional networks over fiber. This revenue category includes hardware- and software-based products and services. Our solutions within this category include open optical terminals, open line systems, optical subsystems and modules, network infrastructure assurance systems and automation platforms that are used to build high-scale, secure and assured optical networks.

ADVA DOMINATION AND PROFIT AND LOSS TRANSFER AGREEMENT

The DPLTA between the Company, as the controlling company, and ADVA Optical Networking SE, as the controlled company, which was executed on December 1, 2022, became effective on January 16, 2023, as a result of its registration with the commercial register (Handelsregister) of the local court (Amtsgericht) at the registered seat of ADVA (Jena).

Under the DPLTA, subject to certain limitations pursuant to applicable law and the specific terms of the DPLTA, (i) the Company is
entitled to issue binding instructions to the management board of ADVA, (ii) ADVA will transfer its annual profit to the Company, subject to, among other things, the creation or dissolution of certain reserves, and (iii) the Company will generally absorb the annual net loss incurred by ADVA. The obligation of ADVA to transfer its annual profit to the Company applies for the first time to the profit, if any, generated in the ADVA fiscal year 2023. The obligation of the Company to absorb ADVA’s annual net loss applies for the first time to the loss, if any, generated in the ADVA fiscal year 2023.

Additionally, and subject to certain limitations pursuant to applicable law and the specific terms of the DPLTA, the DPLTA provides that ADVA shareholders (other than the Company) be offered, at their election, (i) to put their ADVA shares to the Company in exchange for compensation in cash of EUR 17.21 per share (the “Exit Compensation”), or (ii) to remain ADVA shareholders and receive a recurring compensation in cash of EUR 0.59 (EUR 0.52 net under the current tax regime) per share for each full fiscal year of ADVA (the “Annual Recurring Compensation”). The Annual Recurring Compensation is due on the third banking day following the ordinary general shareholders’ meeting of ADVA for the respective preceding fiscal year (but in any event within eight months following expiration of the fiscal year) and is first granted for the 2023 fiscal year, payable for the first time after the ordinary general shareholders’ meeting of ADVA in 2024. The adequacy of both forms of compensation has been challenged by minority shareholders of ADVA via court-led appraisal proceedings under German law, and it is possible that the courts in such appraisal proceedings may adjudicate a higher Exit Compensation or Annual Recurring Compensation (in each case, including interest thereon) than agreed upon in the DPLTA.

The opportunity for outside ADVA shareholders to tender ADVA shares in exchange for Exit Compensation had been scheduled to expire on March 16, 2023. However, due to the appraisal proceedings that have been initiated in accordance with applicable German law, this time period for tendering shares has been extended pursuant to the German Stock Corporation Act (Aktiengesetz) and will end two months after the date on which a final decision in such appraisal proceedings has been published in the Federal Gazette (Bundesanzeiger).

We currently hold 33,957,538 no-par value bearer shares of ADVA, representing 65.37% of ADVA’s outstanding shares as of March 31, 2023.

The foregoing description of the DPLTA does not purport to be complete and is qualified in its entirety by reference to the DPLTA, a non-binding English translation of which is incorporated by reference to Exhibit 10.5 of the 2022 Form 10-K filed with the SEC on March 1, 2023.

During the three months ended March 31, 2023, we did not incur transaction costs related to the Business Combination. During the three months ended March 31, 2022, we recognized $1.5 million of transaction costs relating to the Business Combination.

MULTI-YEAR INTEGRATION PROGRAM

During the fourth quarter of 2022, the Company initiated a multi-year integration program designed to optimize the assets, business processes, and information technology systems of the Company.

The program has identified several potential cost synergies, including:

•
realizing operational scale;
•
combined sales channels;
•
streamlining corporate and general and administrative functions; and
•
combined sourcing and production costs.

We have and will continue to invest significant dollars to restructure the workforce, optimize legacy systems, streamline legal entities and consolidate real estate holdings. By executing these integration activities, we expect to deliver greater innovation for customers, career enrichment opportunities for employees, and enhanced value for shareholders. During the three months ended March 31, 2023, we recognized $0.8 million of integration costs related to the Business Combination that are included in selling, general and administrative expenses in the Condensed Consolidated Statement of Loss. We expect to incur integration costs and costs associated with the implementation of the DPLTA during 2023 and such costs are expected to be material.

During the three months ended March 31, 2023, we recognized $2.4 million of restructuring costs relating to the Business Combination that are included in cost of revenue, selling, general and administrative expenses and research and development expenses in the Condensed Consolidated Statement of Loss. See Note 21 of the Notes to Condensed Consolidated Financial Statements, included in Part I, Item 1 of this report for additional information.

FINANCIAL PERFORMANCE AND TRENDS

We ended the first quarter of 2023 with a year-over-year revenue increase of 109.6% as compared to the three months ended March 31, 2022, driven by increased volume of sales activity due to the Business Combination with ADVA and to Service Provider customers. During the first quarter of 2023, we had two 10% revenue customers, both of which were international Service Provider customers and our five largest customers comprised 40.0% of our revenue. Our year-over-year domestic revenue increased by 32.7%, driven by increased sales volume due to the Business Combination with ADVA, partially offset by decreases due to customer inventory corrections which impacted our Subscriber Solutions and Access & Aggregation product lines. Internationally, our revenue increased by 246.9% compared to the prior year period, primarily driven by increased volume of sales activity due to the Business Combination with ADVA, partially offset by decreases due to customer inventory corrections which primarily impacted our Subscriber Solutions product line.

Growing customer concerns over inventory stocking levels affected our first quarter Subscriber Solutions category. We believe that this over-supply of CPE products will continue into the second quarter of 2023. Revenue for our Access and Optical Networking products grew sequentially. Supply constraints, however, limited our flexibility to clear past-due backlog across all product categories. We believe that the inventory impact is transitory, and we expect to see some improvement to both the over-supply of CPE products and the backlog of products across all categories in the coming quarters. We plan to adjust operating expenditures in the near term to reflect current market conditions; however, we do not see any material changes to our near-term opportunities and our long-term growth catalysts as carriers around the world race to upgrade their networks to fiber. Although we expect our revenue growth and profitability in the near-term to continue to be negatively impacted by supply chain issues, our outlook continues to strengthen given the increased demand for our products and our expectation of an improving supply chain over the longer term.

The coronavirus ("COVID-19") pandemic and related countermeasures previously impacted our operations. Notwithstanding improvement in many markets in which we operate due to a return to more normalized business operations, certain markets continue to be adversely impacted by COVID-19 or as a result of policies relating to COVID-19.

Additionally, due to the pandemic and a global semiconductor chip shortage, we experienced disruption and delays in our supply chain and significant price increases with certain of our manufacturing partners, and those disruptions, delays and price increases may continue. For example, throughout 2022, our results of operations were negatively impacted by increased expenses resulting from supply chain disruptions. The current global supply chain and transportation constraints, including delays in supply chain deliveries and the related global semi-conductor chip shortage, may continue to have a material adverse effect on our operating results and could have a material adverse effect on customer relations and our financial condition. These supply chain challenges and their adverse impact on our industry began to ease during the first quarter of 2023. However, there can be no assurance that the ongoing disruptions due to COVID-19, the related global semiconductor chip shortage or other supply chain constraints or price increases will be resolved in the near term, which could continue to adversely affect our business, financial condition, and results of operations.

Our operating results have fluctuated and may continue to fluctuate on a quarterly basis due to several factors, including customer order activity, supply chain constraints, component availability, the Company's consolidation, purchase accounting, and integration with ADVA. Further, a significant percentage of orders require delivery within a few days requiring us to maintain higher inventory levels. These factors may result in limited order flow visibility. However, with the current global supply chain and limited availability of semiconductor chips and other components of our products, we have experienced and may continue to experience extended lead times, increased logistics intervals and costs, and lower volume of products deliveries, which have had and may continue to have a material adverse effect on our operating results and could have a material adverse effect on customer relations and our financial condition. We believe these supply chain challenges and their adverse impact on our industry will continue at least through fiscal 2023 and expect that the extended lead times and elevated supply chain costs experienced by our industry will persist for the reasonably foreseeable future. It is unclear when the supply environment will become less volatile and what impacts the supply environment will have on the industry in future periods. Operating expenses are relatively fixed in the short term; therefore, a shortfall in quarterly revenues could significantly impact our financial results in a given quarter.

Our operating results may also fluctuate as a result of a number of other factors, including a decline in general economic and market conditions, foreign currency exchange rate movements, inflation, regional conflicts, increased competition, customer order patterns, changes in product and services mix, timing differences between price decreases and product cost reductions, product warranty returns, expediting costs, tariffs and announcements of new products by us or our competitors. Specifically, we expect inflationary pressures on

input costs, such as raw materials and labor, and distribution costs to increase. We continue to support our customer demand for our products by working with our suppliers, contract manufacturers, distributors, and customers to address and to limit the disruption to our operations and order fulfillment. Our attempts to offset these cost pressures, such as through increases in the selling prices of some of our products and services, may not be successful and could negatively affect our operating results. Additionally, maintaining sufficient inventory levels to assure prompt delivery of our products increases the amount of inventory that may become obsolete and increases the risk that the obsolescence of this inventory may have an adverse effect on our business and operating results. Also, not maintaining sufficient inventory levels to ensure prompt delivery of our products may cause us to incur expediting costs to meet customer delivery requirements, which may negatively impact our operating results.

We are exposed to changes in foreign currencies relative to the U.S. dollar, which are references to the differences between the foreign-exchanges rates we use to convert the financial results of our international operations from local currencies into U.S. dollars for financial reporting purposes. This impact of foreign-exchange rate changes is calculated based on the difference between the current period’s currency exchange rates and that of the comparable prior period. Our primary exposures to foreign currency exchange rate movements are with the Euro and the British pound sterling. As a result of our global operations, our revenue, gross margins, operating expense and operating income (loss) in some international markets have been and may continue to be affected by foreign currency fluctuations.

Our historical financial performance is not necessarily a meaningful indicator of future results, and in general, management expects that our financial results may vary from period to period. Factors that could materially affect our business, financial condition or operating results are included in Part I, Item 1A of the 2022 Form 10-K and Part II, Item 1A of this Amendment No. 1.

EFFECT OF RECENT ACCOUNTING PRONOUNCEMENTS

See Note 1 of the Notes to Condensed Consolidated Financial Statements included in Part I, Item 1 of this Amendment No. 1 for a full description of recent accounting pronouncements, including the expected dates of adoption and estimated effects on results of operations and financial condition, which is incorporated herein by reference.

 

RESULTS OF OPERATIONS – THREE MONTHS ENDED MARCH 31, 2023 COMPARED TO THE THREE MONTHS ENDED MARCH 31, 2022

The following table presents selected financial information derived from our Condensed Consolidated Statements of Loss expressed as a percentage of revenue for the periods indicated. Amounts may not foot due to rounding.

 

 

 

Three Months Ended

 

 

 

 

March 31,

 

 

 

 

2023

 

 

2022

 

 

Revenue

 

 

 

 

 

 

 

Network Solutions

 

 

87.2

 

%

 

89.6

 

%

Services & Support

 

 

12.8

 

 

 

10.4

 

 

Total Revenue

 

 

100.0

 

 

 

100.0

 

 

Cost of Revenue

 

 

 

 

 

 

 

Network Solutions

 

 

67.7

 

 

 

58.7

 

 

Services & Support

 

 

5.2

 

 

 

6.2

 

 

Total Cost of Revenue

 

 

72.9

 

 

 

64.8

 

 

Gross Profit

 

 

27.1

 

 

 

35.2

 

 

Selling, general and administrative expenses

 

 

20.8

 

 

 

18.1

 

 

Research and development expenses

 

 

21.7

 

 

 

17.1

 

 

Operating Loss

 

 

(15.4

)

 

 

—

 

 

Interest and dividend income

 

 

0.1

 

 

 

0.1

 

 

Interest expense

 

 

(1.0

)

 

 

—

 

 

Net investment gain (loss)

 

 

0.4

 

 

 

(2.2

)

 

Other expense, net

 

 

(0.1

)

 

 

(0.1

)

 

Loss Before Income Taxes

 

 

(16.0

)

 

 

(2.3

)

 

Income tax benefit

 

 

3.5

 

 

 

1.6

 

 

Net Loss

 

 

(12.5

)

%

 

(0.7

)

%

Less: Net Loss attributable to non-controlling interest

 

 

(1.8

)

 

 

—

 

 

Net Loss attributable to ADTRAN Holdings, Inc.

 

 

(10.6

)

%

 

(0.7

)

%

 

REVENUE

Our revenue increased 109.6% from $154.5 million for the three months ended March 31, 2022 to $323.9 million for the three months ended March 31, 2023. The increase in revenue for the three months ended March 31, 2023 is primarily attributable to a $192.3 million increase in volume of sales activity due to the Business Combination with ADVA partially offset by a $22.9 million decrease in volume

of sales activity related to our ADTRAN, Inc. operations. The increase in revenue by category for the three months ended March 31, 2023 was primarily attributable to a $147.8 million increase in Optical Networking Solutions products due to the Business Combination with ADVA, and a $22.6 million increase in Subscriber Solutions products, partially offset by a $1.0 million decrease in Access & Aggregation Solutions revenue. Growing customer concerns over inventory stocking levels affected our first quarter Subscriber Solutions category. We believe that this over-supply of CPE products will continue into the second quarter of 2023. Revenue for our Access and Optical Networking products grew sequentially. Supply constraints, however, limited our flexibility to clear past-due backlog across all product categories. We believe that the inventory impact is transitory, and we expect to see some improvement to both the over-supply of CPE products and the backlog of products across all categories in the coming quarters. We do not see any material changes to our near-term opportunities and our long-term growth catalysts as carriers around the world upgrade their networks to fiber.

Network Solutions segment revenue increased 104.1% from $138.4 million for the three months ended March 31, 2022 to $282.4 million for the three months ended March 31, 2023. The increase in revenue for the three months ended March 31, 2023 was due primarily to the increase of $167.0 million in volume of sales activity due to the Business Combination with ADVA, partially offset by a decrease of $11.1 million and $11.8 million in Subscriber Solutions products and Access & Aggregation Solutions in our ADTRAN, Inc. operations, respectively.

Services & Support segment revenue increased 157.0% from $16.1 million for the three months ended March 31, 2022 to $41.5 million for the three months ended March 31, 2023. The increase in revenue for the three months ended March 31, 2023 was primarily attributable to the increase of $25.3 million in volume of sales activity from the Business Combination with ADVA and a $0.8 million increase in revenue for Subscriber Solutions services in our ADTRAN, Inc. operations, partially offset by a decrease of $0.7 million of Access & Aggregation Solutions services in our ADTRAN, Inc. operations.

Domestic revenue increased by 32.7% from $99.0 million for the three months ended March 31, 2022 to $131.5 million for the three months ended March 31, 2023, driven by increased volume of network termination and fiber CPE in our Network Solutions segment. In addition, such growth was a result of increased revenue to Tier-2 and Tier-3 customers with diversified businesses among our fiber access and CPE, Service Provider CPE and services.

International revenue, which is defined as revenue generated from the Network Solutions and Services & Support segments provided to a customer outside of the U.S., increased by 246.9% from $55.5 million for the three months ended March 31, 2022 to $192.4 million for the three months ended March 31, 2023. International revenue, as a percentage of total revenue, increased from 35.9% for the three months ended March 31, 2022 to 59.4% for the three months ended March 31, 2023. This change was primarily attributable to the increase in volume of $130.4 million in sales activity from the Business Combination with ADVA and increased shipments to a Tier-1 network operator and multiple alternative network operators in Europe. While international revenue has increased to approximately 59% of total revenues for the three months ended March 31, 2023, the mix of our Network Solutions and Services & Support segments as a percentage of total international revenue remains relatively linear. For the three months ended March 31, 2023 as compared to the three months ended March 31, 2022, changes in foreign currencies relative to the U.S. dollar decreased our net revenue by approximately $10.1 million.

Our ADTRAN, Inc. international revenue is largely focused on broadband infrastructure and is consequently affected by the decisions of our customers as to timing for installation of new technologies, expansion of their networks and/or network upgrades. Our international customers must make these decisions in the regulatory and political environment in which they operate – both nationally and, in some instances, regionally – whether of a multi-country region or a more local region within a country. Consequently, while we expect the global trend towards deployment of more robust broadband speeds and access to continue creating additional market opportunities for us, the factors described above may result in pressure on revenue and operating income. Our ADVA international revenue is largely focused on the manufacture and selling of networking solutions that are based on three core areas of expertise: fiber-optic transmission technology (cloud interconnect), cloud access technology for rapid creation of innovative services around the network edge and solutions for precise timing and synchronization of networks. In addition, ADVA's international operations offers a comprehensive portfolio of network design, implementation and maintenance services to assist operators in the deployment of market-leading networks while reducing costs to maintain these networks.

COST OF REVENUE

As a percentage of revenue, cost of revenue increased from 64.8% for the three months ended March 31, 2022 to 72.9% for the three months ended March 31, 2023. The increase was primarily attributable to $32.6 million of adjustments consisting of intangible amortization of backlog, developed technology and fair value adjustments to inventory costs that flow through to cost of revenue as a result of the Business Combination with ADVA, acquisition related expenses, and to a lesser extent changes in customer and product mix and a regional revenue shift in our ADTRAN, Inc. operations. As the current inventory that was acquired in the Business Combination with ADVA is sold, we expect that our cost of revenue as a percentage of revenue will return to more normalized levels. For the three months ended March 31, 2023 as compared to the three months ended March 31, 2022, changes in foreign currencies relative to the U.S. dollar decreased our cost of revenue by approximately $2.0 million. See additional information related to amortization lives and expense in Notes 2 and 10 of Notes to the Condensed Consolidated Financial Statements included in Part I, Item 1 of this Amendment No. 1.

Network Solutions cost of revenue, as a percentage of that segment’s revenue, increased from 65.5% for the three months ended March 31, 2022 to 77.6% for the three months ended March 31, 2023. The increase in cost of revenue as a percentage of revenue was primarily attributable to acquisition related expenses, amortizations and adjustments consisting of intangible amortization of backlog, developed technology and fair value adjustments to inventory costs that flow through to cost of revenue as a result of the Business Combination with ADVA and to a lesser extent changes in customer and product mix and a regional revenue shift in our ADTRAN, Inc. operations.

Services & Support cost of revenue, as a percentage of that segment’s revenue, decreased from 59.1% for the three months ended March 31, 2022 to 40.9% for the three months ended March 31, 2023. The decrease in cost of revenue as a percentage of revenue was primarily attributable to customer mix and changes in Services & Support mix as a result of the Business Combination with ADVA.

Services & Support revenue is comprised of network planning and implementation, maintenance, support and cloud-based management services, with network planning and implementation being the largest and fastest growing component in the long-term. Compared to our other services, such as maintenance, support and cloud-based management services, our network planning and implementation services typically utilize a higher percentage of internal and subcontracted engineers, professionals and contractors to perform the work for customers. The additional costs incurred to perform these infrastructure and labor-intensive services inherently result in lower average gross margins as compared to maintenance and support services. Within the Services & Support segment, we do expect variability in gross margins from quarter-to-quarter based on the mix of the services recognized.

GROSS PROFIT

As a percentage of revenue, gross profit decreased from 35.2% for the three months ended March 31, 2022 to 27.1% for the three months ended March 31, 2023. The decrease was primarily attributable to increases in cost of revenue related to $32.6 million of adjustments consisting of intangible amortization of backlog, developed technology and fair value adjustments to inventory costs that flow through to cost of revenue as a result of the Business Combination with ADVA, acquisition related expenses and a decrease in volume of sales activity related to our ADTRAN, Inc. operations partially offset by a decrease in cost of revenue.

As a percentage of that segment's revenue, Network Solutions gross profit decreased from 34.5% for the three months ended March 31, 2022 to 22.4% for the three months ended March 31, 2023. The decrease was primarily attributable to increases in cost of revenue related to acquisition related expenses, adjustments consisting of intangible amortization of backlog, developed technology and fair value adjustments to inventory costs that flow through to cost of revenue as a result of the Business Combination with ADVA and a decrease in volume of sales activity related to our ADTRAN, Inc. operations partially offset by an increase in volume of sales activity due to the Business Combination with ADVA.

As a percentage of that segment's revenue, Services & Support gross profit increased from 40.9% for the three months ended March 31, 2022 to 59.1% for the three months ended March 31, 2023. The increase was primarily attributable to an crease in volume of sales activity due to the Business Combination with ADVA, an increase in volume of sales activity related to our ADTRAN, Inc. and a decrease in cost of revenue attributable to customer mix and changes in Services & Support mix as a result of the Business Combination with ADVA.

 

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

As a percentage of revenue, selling, general and administrative expenses increased from 18.1% for the three months ended March 31, 2022 to 20.8% for the three months ended March 31, 2023. While selling, general and administrative expenses as a percentage of revenue will generally fluctuate whenever there is a significant fluctuation in revenue for the periods being compared, in the first quarter we saw a more significant increase due to increased expenses related to the Business Combination with ADVA and other items described below. Our restructuring and integration programs are in the process of consolidating, streamlining and integrating the workforce, systems and processes of ADTRAN and ADVA, which we expect will lower selling, general and administrative expense as a percentage of revenue over time.

Selling, general and administrative expenses increased 141.6% from $27.9 million for the three months ended March 31, 2022 to $67.4 million for the three months ended March 31, 2023. Although selling, general and administrative expenses include personnel costs for management, accounting, information technology, human resources, sales and marketing, as well as independent auditor, tax and other professional fees, contract services and legal and litigation related costs. The increase in selling, general and administrative expenses was primarily attributable to increased expenses related to the Business Combination with ADVA such as employee-related costs due to an increase in the number of employees, costs related to our restructuring program, amortization of intangible assets, depreciation of property, plant and equipment, restructuring expenses, stock-based compensation expense and transactions costs. For the three months ended March 31, 2023 as compared to the three months ended March 31, 2022, changes in foreign currencies relative to the U.S dollar decreased our selling, general and administrative expenses by approximately $1.5 million.

 

RESEARCH AND DEVELOPMENT EXPENSES

As a percentage of revenue, research and development expenses increased from 17.1% for the three months ended March 31, 2022 to 21.7% for the three months ended March 31, 2023. Although, research and development expenses as a percentage of revenue will

fluctuate whenever there are incremental product development activities or significant fluctuations in revenue for the periods being compared, in the first quarter we saw a more significant increase due to increased expenses related to the Business Combination with ADVA and other items described below.

Research and development expenses increased 164.8% from $26.5 million for the three months ended March 31, 2022 to $70.1 million for the three months ended March 31, 2023. The increase in research and development expenses was primarily attributable to increased expenses related to the Business Combination with ADVA such as employee-related costs due to an increase in the number of employees and expenses related to our multi-year integration program, amortization of intangible assets, depreciation of property, plant and equipment and stock-based compensation expense. For the three months ended March 31, 2023 as compared to the three months ended March 31, 2022, changes in foreign currencies relative to the U.S. dollar decreased our research and development expenses by approximately $2.2 million.

ADVA has arrangements with governmental entities for the purpose of obtaining funding for research and development activities. The Company classifies government grants received under these arrangements as a reduction to research and development expense incurred. For the three months ended March 31, 2023, the Company recognized $0.6 million as a reduction of research and development expense.

We expect to continue to incur research and development expenses in connection with our new and existing products. We continually evaluate new product opportunities and engage in significant research and product development efforts, which provides for new product development, enhancement of existing products and product cost reductions. We may incur significant research and development expenses prior to the receipt of revenue from a major new product group.

INTEREST AND DIVIDEND INCOME

Interest and dividend income increased from $0.2 million for the three months ended March 31, 2022 to $0.3 million for the three months ended March 31, 2023. Interest and dividend income was up due to increased income related to the Business Combination with ADVA for the three months ended March 31, 2023.

INTEREST EXPENSE

Interest expense increased from less than $0.1 million for the three months ended March 31, 2022 to $3.3 million for the three months ended March 31, 2023. The increase in interest expense during the three months ended March 31, 2023 was primarily related to an increase in the new Wells Fargo Credit Agreement and the assumed debt associated with the Business Combination with ADVA. See Note 12 and Note 13 of the Notes to Condensed Consolidated Financial Statements, included in Part I, Item 1 of this Amendment No. 1.

NET INVESTMENT (LOSS) GAIN

We recognized a net investment loss of $3.4 million and a gain of $1.3 million for the three months ended March 31, 2022 and 2023, respectively. The fluctuations in our net investments were primarily attributable to changes in the fair value of our securities recognized during the period. We expect that any future market volatility could result in continued fluctuations in our investment portfolio. See Note 6 of the Notes to Condensed Consolidated Financial Statements, included in Part I, Item 1 of this Amendment No. 1, and “Investing Activities” in “Liquidity and Capital Resources” below for additional information.

 

OTHER EXPENSE, NET

Other expense, net, which primarily consisted of gains and losses on foreign currency transactions and income from excess material sales, increased from an expense of $0.2 million for the three months ended March 31, 2022 to expense of $0.3 million for the three months ended March 31, 2023.

 

INCOME TAX BENEFIT

Our effective tax rate changed from a benefit of 68.1% of pre-tax income for the three months ended March 31, 2022, to a benefit of 21.9% of pre-tax income for the three months ended March 31, 2023. In 2022, we benefited from a change in our annual estimated tax rate as a result of the requirement to begin capitalizing research and development expenses for U.S. tax purposes beginning in 2022 as previously passed as part of the Tax Cuts and Jobs Act in December 2017, and the associated impact of those changes on our previously established valuation allowance. The change in the effective tax rate for the three months ended March 31, 2023, was driven primarily by a change in our estimated tax rate as a result of the closing of the Business Combination with ADVA during the third quarter of 2022 as well as the release of our domestic valuation allowance during the fourth quarter of 2022.

NET LOSS ATTRIBUTABLE TO ADTRAN HOLDINGS, INC.

As a result of the above factors, net loss attributable to ADTRAN Holdings, Inc. increased from $1.1 million for the three months ended March 31, 2022 to $34.5 million for the three months ended March 31, 2023. Upon the DPLTA becoming effective on January 16, 2023, the Company began absorbing all ADVA losses rather than just the loss related to the Company's ownership percentage in ADVA.

 

LIQUIDITY AND CAPITAL RESOURCES

Liquidity

We have historically financed our ongoing business with existing cash, investments and cash flow from operations. In the current supply environment we also expect to utilize our credit arrangements to manage our working capital needs. We have used, and expect to continue to use, existing cash, investments, credit arrangements and cash generated from operations for working capital, business acquisitions, shareholder dividends and other general corporate purposes, including product development activities to enhance our existing products and develop new products, expand our sales and marketing activities and fund capital expenditures. As of March 31, 2023, the Company has incurred a total of $26.1 million of transaction costs related to the Business Combination. We are also obligated to compensate any annual net loss of ADVA under the DPLTA. Additionally, pursuant to the terms of the DPLTA, each ADVA shareholder (other than the Company) has received an offer to elect either (1) to remain an ADVA shareholder and receive from us an Annual Recurring Compensation payment, or (2) to receive Exit Compensation. Assuming all of the minority holders of currently outstanding ADVA shares were to elect the second option, we would be obligated to make aggregate Exit Compensation payments of approximately EUR 309.5 million or approximately $335.6 million, based on an exchange rate as of March 31, 2023. Shareholders electing the first option of Annual Recurring Compensation may later elect the second option. The opportunity for outside ADVA shareholders to tender ADVA shares in exchange for Exit Compensation had been scheduled to expire on March 16, 2023. However, due to the appraisal proceedings that have been initiated in accordance with applicable German law, this time period for tendering shares has been extended pursuant to the German Stock Corporation Act (Aktiengesetz) and will end two months after the date on which a final decision in such appraisal proceedings has been published in the Federal Gazette (Bundesanzeiger).

Our obligation to pay Annual Recurring Compensation under the DPLTA is a continuing payment obligation, which will amount to approximately EUR 10.5 million or $11.3 million (based on the current exchange rate) per year assuming none of the minority ADVA shareholders were to elect Exit Compensation. The foregoing amounts do not reflect any potential increase in payment obligations that we may have depending on the outcome of ongoing appraisal proceedings in Germany. During the three months ended March 31, 2023, we accrued $2.8 million in Annual Recurring Compensation, which was reflected as a reduction to retained earnings.

We believe that our cash and cash equivalents, investments, cash generated from operations and access to funds under the new Wells Fargo credit facility (described below) will be adequate to meet our operating and capital needs and our obligations under the Business Combination and the DPLTA for at least the next 12 months.

As of March 31, 2023, our cash on hand was $136.5 million and short-term investments were $1.0 million, which resulted in available short-term liquidity of $137.5 million, of which $112.5 million was held by our foreign subsidiaries. As of December 31, 2022, cash on hand was $108.6 million and short-term investments were $0.3 million, which resulted in available short-term liquidity of $108.9 million, of which $86.3 million was held by our foreign subsidiaries. Generally, we intend to permanently reinvest funds held outside the U.S., except to the extent that any of these funds can be repatriated without withholding tax.

In addition to our cash and cash equivalents and the credit facility, we may fund a portion or all of the Exit Compensation through the sale of securities. There can be no assurances that we would be successful in effecting these actions on commercially reasonable terms or at all.

Operating Activities

Net cash used in operating activities of $19.9 million during the three months ended March 31, 2023 decreased by $24.8 million compared to net cash provided of $4.9 million during the three months ended March 31, 2022. This decrease was primarily due to the net loss for the period, for the reasons discussed above, as adjusted primarily for depreciation and deferred taxes, and net cash outflows from working capital, specifically, a decrease in the average number of days payable to our trade suppliers. Additional details related to our working capital and its drivers are discussed below.

Net accounts receivable decreased 6.2% from $279.4 million as of December 31, 2022 to $262.0 million as of March 31, 2023. There was an allowance for credit losses of $0.1 million as of March 31, 2023 and an allowance for credit losses of less than $0.1 million as of December 31, 2022. The decrease in net accounts receivable was due primarily to customer and geographical mix. Quarterly accounts receivable DSO increased from 72 days as of December 31, 2022 to 73 days as of March 31, 2023. The increase in DSO was due to customer and geographical mix associated with the Business Combination with ADVA and timing of sales within the quarter.

Other receivables decreased 5.8% from $32.8 million as of December 31, 2022 to $30.9 million as of March 31, 2023. The decrease in other receivables was primarily attributable to a decrease for sales of raw materials.

Quarterly inventory turnover was 2.5 turns as of December 31, 2022 and 2.2 turns as of March 31, 2023. Inventory decreased 2.6% from $427.5 million as of December 31, 2022 to $416.3 million as of March 31, 2023. The decrease in inventory was due to a reduction in component purchases due to improved lead times as well as utilization of buffer stock. We expect inventory levels to fluctuate as we attempt to maintain sufficient inventory in response to supply chain uncertainties.

Accounts payable decreased 16.5% from $237.7 million as of December 31, 2022 to $198.6 million as of March 31, 2023. The decrease in accounts payable was primarily due to a decrease in the average number of days payable to our trade suppliers. Accounts payable will

fluctuate due to variations in the timing of the receipt of inventory, supplies and services and our subsequent payments for these purchases.

Investing Activities

Capital expenditures totaled approximately $8.4 million and $1.5 million for the three months ended March 31, 2023 and 2022, respectively. These expenditures were primarily used to purchase manufacturing and test equipment, software, computer hardware and building improvements.

Our combined short-term and long-term investments increased $1.1 million from $33.0 million as of December 31, 2022 to $34.1 million as of March 31, 2023. This increase reflects the impact of the net unrealized and realized gains and losses on our investments.

We typically invest all available cash not required for immediate use in operations, primarily in securities that we believe bear minimal risk of loss. See Note 6 of the Notes to Condensed Consolidated Financial Statements included in Part I, Item 1 of this Amendment No. 1 for additional information.

As of March 31, 2023, our corporate bonds, municipal bonds, asset-backed bonds, mortgage/agency bonds, U.S. government bonds and other government bonds were classified as available-for-sale and had a combined duration of 1.43 years with an average Standard & Poor’s credit rating of AA. Because our investment portfolio has a high-quality rating and contractual maturities of short duration, we are able to obtain prices for these bonds derived from observable market inputs, or for similar securities traded in an active market, on a daily basis.

Our long-term investments increased 1.0% from $32.7 million as of December 31, 2022 to $33.0 million as of March 31, 2023. Our investments include various marketable equity securities classified as long-term investments with a fair market value of $0.8 million as of March 31, 2023 and December 31, 2022. Long-term investments as of March 31, 2023 and December 31, 2022 also included $24.0 million and $22.9 million, respectively, related to our deferred compensation plans.

Financing Activities

Dividends

During the three month periods ended March 31, 2023 and 2022, we paid dividends totaling $7.1 million and $4.4 million, respectively. The continued payment of dividends is at the discretion of the Company’s Board of Directors and is subject to general business conditions and ongoing financial results of the Company.

Stock Repurchase Program

There were no stock repurchases during the periods ended March 31, 2023 and 2022, and there currently is no authorized stock repurchase plan.

Stock Option Exercises

To accommodate employee stock option exercises, the Company issued 6 thousand and 33 thousand shares of common stock and treasury stock which resulted in proceeds of $58 thousand and $0.6 million during the three months ended March 31, 2023 and 2022, respectively.

Off-Balance Sheet Arrangements

We do not have off-balance sheet financing arrangements and have not engaged in any related party transactions or arrangements with unconsolidated entities or other persons that are reasonably likely to materially affect liquidity or the availability of or requirements for capital resources.

Cash Requirements

The following table (restated) summarizes the Company’s material short- and long-term cash requirements from known obligations pursuant to certain contracts and commitments as of March 31, 2023, as well as an estimate of the timing in which such obligations and payments are expected to be satisfied (but excluding payments that may be made pursuant to the DPLTA and currency hedging arrangements, which are discussed below). Other than operating lease obligations, the cash requirements table excludes interest payments.

 

(In thousands)

 

Total

 

 

2023

 

 

2024

 

 

2025

 

 

2026

 

 

2027

 

 

After 2027

 

Wells Fargo credit agreement(1)

 

$

180,000

 

 

$

—

 

 

$

—

 

 

$

—

 

 

$

—

 

 

$

180,000

 

 

$

—

 

Nord/LB revolving line of credit(2)

 

 

10,843

 

 

 

10,843

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Purchase obligations(3)

 

 

459,313

 

 

 

404,351

 

 

 

52,307

 

 

 

2,648

 

 

 

7

 

 

 

—

 

 

 

—

 

Operating lease obligations(4)

 

 

33,494

 

 

 

6,741

 

 

 

8,397

 

 

 

6,914

 

 

 

4,089

 

 

 

2,864

 

 

 

4,489

 

Totals

 

$

683,650

 

 

$

421,935

 

 

$

60,704

 

 

$

9,562

 

 

$

4,096

 

 

$

182,864

 

 

$

4,489

 

(1) See description below.

(2) See description below.

(3) We have purchase obligations related to open purchase orders to our contract manufacturers, ODMs, component suppliers, service

partners and other vendors. The settlement of our purchase obligations will occur at various dates beginning in 2023 and going

through 2026. See Note 20 of the Notes to Condensed Consolidated Financial Statements, included in Part I, Item 1 of this

Amendment No. 1 for more information.

(4) We have operating leases for office space, automobiles and various other equipment in the U.S. and in certain international

locations. Our operating leases had remaining lease terms ranging from two month to 116 months as of March 31, 2023.

Wells Fargo Credit Agreement

On July 18, 2022, ADTRAN Holdings, Inc. and ADTRAN, Inc., as the borrower, entered into a credit agreement with a syndicate of banks, including Wells Fargo Bank, National Association, as administrative agent (“Administrative Agent”), and the other lenders named therein (the “Credit Agreement”). The Credit Agreement allowed for borrowings of up to $100 million in aggregate principal amount, but the borrowings increased to up to $400 million in aggregate principal amount upon the DPLTA becoming effective on January 16, 2023.

As of March 31, 2023, ADTRAN, Inc.’s borrowings under the revolving line of credit were $180.0 million. In addition, we may issue up to $25.0 million in letters of credit against our $400.0 million total facility. As of March 31, 2023, we had a total of $3.4 million in letters of credit under ADTRAN, Inc. outstanding against our eligible borrowings, leaving a net amount of $216.6 million available for future borrowings. Any future credit extensions under the Credit Agreement are subject to customary conditions precedent. The proceeds of any loans are expected to be used for general corporate purposes and to pay a portion of the Exit Compensation consideration. The Credit Agreement matures in July 2027 but provides the Company with an option to request extensions subject to customary conditions.

All U.S. borrowings under the Credit Agreement (other than swingline loans, which will bear interest at the Base Rate (as defined below)) will bear interest, at the Company’s option, at a rate per annum equal to (A)(i) the highest of (a) the federal funds rate (i.e., for any day, the rate per annum equal to the weighted average of the rates on overnight federal funds transactions with members of the Federal Reserve System, as published by the Federal Reserve Bank of New York on the business day next succeeding such day) plus ½ of 1%, (b) the prime commercial lending rate of the Administrative Agent, as established from time to time at its principal U.S. office (which such rate is an index or base rate and will not necessarily be its lowest or best rate charged to its customers or other banks), and (c) the daily Adjusted Term SOFR (as defined in the Credit Agreement) for a one-month tenor plus 1%, plus (ii) the applicable rate, ranging from 0.5% to 1.25% (the “Base Rate”), or (B) the sum of the Adjusted Term SOFR (as defined in the Credit Agreement) plus the applicable rate, ranging from 1.4% to 2.15%, provided that such sum is subject to a 0.0% floor (such loans utilizing this interest rate, “SOFR Loans”). All E.U. borrowings under the Credit Agreement (other than swingline loans) will bear interest at a rate per annum equal to the sum of the Euro Interbank Offered Rate as administered by the European Money Markets Institute (or a comparable or successor administrator approved by the Administrative Agent) plus the applicable rate, ranging from 1.5% to 2.25%, provided that such sum is subject to a 0.0% floor (such loans utilizing this interest rate, “EURIBOR Loans”). The applicable rate is based on the consolidated net leverage ratio of the Company and its subsidiaries as determined pursuant to the terms of the Credit Agreement. Default interest is 2.00% per annum in excess of the rate otherwise applicable in the case of any overdue principal or any other overdue amount.

In addition to paying interest on outstanding principal under the Credit Agreement, the Company is required to pay a commitment fee to the lenders under the Credit Agreement in respect of unutilized revolving loan commitments and an additional commitment ticking fee at a rate of 0.25% on the commitment amounts of each lender until the earliest of (i) the date of the Senior Credit Facilities Increase, (ii) the Company’s voluntary termination of the credit facility commitment, and (iii) December 31, 2023. The Company is also required to pay a participation fee to the Administrative Agent for the account of each lender with respect to the Company’s participation in letters of credit at the then applicable rate for SOFR Loans.

The Credit Agreement permits the Company to prepay any or all of the outstanding loans or to reduce the commitments under the Credit Agreement without incurring premiums or penalties (except breakage costs with respect to SOFR Loans and EURIBOR Loans). The Credit Agreement contains customary affirmative and negative covenants, including incurrence covenants and certain other limitations on the ability of the Company and the Company’s subsidiaries to incur additional debt, guarantee other obligations, grant liens on assets, make investments, dispose of assets, pay dividends or other payments on capital stock, make restricted payments, engage in mergers or consolidations, engage in transactions with affiliates, modify its organizational documents, and enter into certain restrictive agreements. It also contains customary events of default (subject to customary cure periods and materiality thresholds). Furthermore, the Credit Agreement requires that the Consolidated Total Net Leverage Ratio (as defined in the Credit Agreement) of the Company and its subsidiaries tested on the last day of each fiscal quarter not exceed 3.25 to 1.0 through September 30, 2024 and 2.75 to 1.00 from December 31, 2024 and thereafter, subject to certain exceptions. The Credit Agreement also requires that the Consolidated Interest Coverage Ratio (as defined in the Credit Agreement) of the Company and its subsidiaries tested on the last day of each fiscal quarter not fall below 3.00 to 1.00.

Finally, pursuant to a Collateral Agreement, dated as of July 18, 2022, among the Company, ADTRAN, Inc. and the Administrative Agent, ADTRAN, Inc.’s obligations under the Credit Agreement are secured by substantially all of the assets of ADTRAN, Inc. and the Company. In addition, the Company has guaranteed ADTRAN, Inc.’s obligations under the Credit Agreement pursuant to a Guaranty Agreement, dated as of July 18, 2022, by ADTRAN, Inc. and the Company in favor of the Administrative Agent.

New Nord/LB Revolving Line of Credit

On March 29, 2023, ADVA entered into a $16.1 million unsecured revolving line of credit with Norddeutsche Landesbark - Girozentrale (Nord/LB) that bears interest of Euro Short Term Rate plus 1.94%. The line of credit has a perpetual term that can be terminated by the Company or Nord/LB at any time. As of March 31, 2023 ADVA borrowed $10.8 million under this facility.

Currency Hedging Arrangements

On November 3, 2022, the Company entered into a Euro/U.S. forward contract arrangement (the “Initial Forward”) with Wells Fargo Bank, N.A. (the “Hedge Counterparty”). The Initial Forward, which is governed by the provisions of an ISDA Master Agreement (including schedules thereto and transaction confirmations that supplement such agreement) entered into between the Company and the Hedge Counterparty, enables the Company to convert a portion of its Euro denominated payment obligations under the DPLTA into U.S. Dollars. Under the Initial Forward, the Company agreed to exchange an aggregate notional amount of $160.0 million U.S. dollars for Euros at a daily fixed forward rate ranging from $0.98286 to $1.03290. The aggregate amount of $160.0 million is divided into eight quarterly tranches of $20.0 million, commencing in the fourth quarter of 2022. The Company, at its sole discretion, may exchange all or part of each tranche on any given day within the applicable quarter; provided, however, that it must exchange the full tranche by the end of such quarter. The Initial Forward may be accelerated or terminated early for a number of reasons, including but not limited to (i) non-payment by the Company or the Hedge Counterparty, (ii) breach of representation or warranty or covenant by either party or (iii) insolvency or bankruptcy of either party.

On March 21, 2023, the Company entered into a Euro/U.S. dollar forward contract arrangement (the “Forward”) with Wells Fargo Bank, N.A. (the “Hedge Counterparty”). Under the Forward, which is governed by the provisions of an ISDA Master Agreement (including schedules thereto and transaction confirmations that supplement such agreement) entered into between the Company and the Hedge Counterparty, the Company will exchange an aggregate notional amount of $160.0 million U.S. dollars for Euros at a daily fixed forward rate of $1.085 per €1.00 in average. During the three months ended March 31, 2023, the Company settled one $20.0 million forward contract tranche and the remaining will be divided into seven quarterly tranches of $20.0 million. These new forward contracts transacted on March 21, 2023 (to sell EUR/buy USD) were entered into for the purpose of unwinding the previously transacted forward contracts (to buy EUR/sell USD), transacted in November 2022. The drawdown dates of the original ratchet forwards are set to the same date as the maturity of the new offsetting forward contracts.

ADVA Domination and Profit and Loss Transfer Agreement

On December 1, 2022, we, as the controlling company, entered into the DPLTA with ADVA, as the controlled company. The DPLTA, which was executed on December 1, 2022, became effective on January 16, 2023, as a result of its registration with the commercial register (Handelsregister) of the local court (Amtsgericht) at the registered seat of ADVA (Jena).

Under the DPLTA, subject to certain limitations pursuant to applicable law, (i) we are entitled to issue binding instructions to the management board of ADVA, (ii) ADVA will transfer all of its annual profits to us, subject to, among other things, the creation or dissolution of certain reserves, and (iii) we will generally absorb all annual losses incurred by ADVA. The obligation of ADVA to transfer its annual profit to us, as well as our obligation to absorb ADVA’s annual net loss, applies for the first time to the profits or losses generated in the ADVA fiscal year 2023.

Additionally, and subject to certain limitations pursuant to applicable law and the specific terms of the DPLTA, the DPLTA provides that ADVA shareholders (other than us) be offered, at their election, (i) to put their ADVA shares to the Company in exchange for compensation in cash of EUR 17.21 per share (the “Exit Compensation”), or (ii) to remain ADVA shareholders and receive a recurring compensation in cash of EUR 0.59 (EUR 0.52 net under the current tax regime) per share for each full fiscal year of ADVA (the “Annual Recurring Compensation”). The Annual Recurring Compensation is due on the third banking day following the ordinary general shareholders’ meeting of ADVA for the respective preceding fiscal year (but in any event within eight months following expiration of the fiscal year) and is first granted for the 2023 fiscal year, payable for the first time after the ordinary general shareholders’ meeting of ADVA in 2024. The adequacy of both forms of compensation have been challenged by minority shareholders of ADVA via court-led appraisal proceedings under German law, and it is possible that the courts in such appraisal proceedings may adjudicate a higher Exit Compensation or Annual Recurring Compensation (in each case, including interest thereon) than agreed upon in the DPLTA. Our aggregate potential payment obligations under the DPLTA are discussed above under "Liquidity".

The opportunity for outside ADVA shareholders to tender ADVA shares in exchange for Exit Compensation had been scheduled to expire on March 16, 2023. However, due to the appraisal proceedings that have been initiated in accordance with applicable German law, this time period for tendering shares has been extended pursuant to the German Stock Corporation Act (Aktiengesetz) and will end two months after the date on which a final decision in such appraisal proceedings has been published in the Federal Gazette (Bundesanzeiger).

We currently hold 33,957,538 no-par value bearer shares of ADVA, representing 65.38% of ADVA’s outstanding shares as of March 31, 2023.

The foregoing description of the DPLTA does not purport to be complete and is qualified in its entirety by reference to the DPLTA, a non-binding English translation of which incorporated by reference to Exhibit 10.5 of the 2022 Form 10-K.

During the three months ended March 31, 2023, we did not incur transaction costs related to the Business Combination. During the three months ended March 31, 2022, we recognized $1.5 million of transaction costs relating to the Business Combination.

During the three months ended March 31, 2023, we recognized $0.8 million of integration costs related to the Business Combination that are included in selling, general and administrative expenses in the Condensed Consolidated Statement of Loss. We expect to incur integration costs and costs associated with the implementation of the DPLTA during 2023 and such costs are expected to be material.

During the three months ended March 31, 2023, we recognized $2.4 million of restructuring costs relating to the Business Combination that are included in cost of revenue, selling, general and administrative expenses and research and development expenses in the Condensed Consolidated Statement of Loss. See Note 21 of the Notes to Condensed Consolidated Financial Statements, included in Part I, Item 1 of this report for additional information.


 

Other Cash Requirements

During the three months ended March 31, 2023, other than the Exit Compensation payments and Annual Recurring Compensation under the DPLTA, there have been no other material changes in cash requirements from those discussed in the 2022 Form 10-K/A.

Performance Bonds

Certain contracts, customers and jurisdictions in which we do business require us to provide various guarantees of performance such as bid bonds, performance bonds and customs bonds. As of March 31, 2023 and December 31, 2022, we had commitments related to these bonds totaling $11.7 million and $21.1 million, respectively, which expire at various dates through April 2031. In general, we would only be liable for the amount of these guarantees in the event of default under each contract, the probability of which we believe is remote.

Critical Accounting Policies and Estimates

An accounting policy is deemed to be critical if it requires an accounting estimate to be made based on assumptions about matters that are highly uncertain at the time the estimate is made, if different estimates reasonably could have been used or if changes in the accounting estimate that are reasonably likely to occur could materially impact the results of financial operations. Several accounting policies, as described in Note 1 of Notes to the Consolidated Financial Statements included in Part I, Item 1 of this report, require material subjective or complex judgment and have a significant impact on our financial condition and results of operations, as applicable. We believe the critical accounting policies affect our more significant judgments and estimates used in the preparation of our Condensed Consolidated Financial Statements. During the three months ended March 31, 2023, other than the change in accounting policy regarding non-controlling interests as outlined in Note 1 and Note 16 to Condensed Consolidated Financial Statements included in Part I, Item 1 of this report, there were no significant changes to our critical accounting policies and estimates as described in the financial statements contained in the 2022 Form 10-K/A.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure that the information required to be disclosed by us in reports that we file or submit under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is recorded, processed, summarized and reported within the time periods specified in the rules and forms promulgated by the SEC, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and our Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

As of the end of the period covered by this report, an evaluation was carried out by management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e)) under the Exchange Act. At the time of the Original Filing, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of March 31, 2023. Subsequent to that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, due to the material weakness in our internal control over financial reporting described below, our disclosure controls and procedures were not effective as of March 31, 2023.

Material Weakness in Internal Control over Financial Reporting

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.

We identified that we did not design and maintain effective controls over the presentation and disclosure of debt agreements, specifically to ensure the presentation and disclosure reflect the terms of the agreements. This material weakness resulted in the restatement of our consolidated financial statements for the year ended December 31, 2022, as well as the condensed consolidated financial statements for the three and nine months ended September 30, 2022 and for the three months ended March 31, 2023. Additionally, this material weakness could result in misstatements of the accounts or disclosures that would result in a material misstatement to the annual or interim consolidated financial statements that would not be prevented or detected, including the misstatements that required the filing of this Amendment No. 1.

Management’s Remediation Efforts

To remediate the material weakness in the Company’s internal control over financial reporting, the Company plans to initiate a remediation plan that includes implementing a new control over the review of new or amendments to our agreements for terms and conditions that impact the presentation or disclosure of debt. We believe that the foregoing actions will support the improvement of the Company’s internal control over financial reporting, and, through our efforts to identify, design, and implement the necessary control activities, will be effective in remediating the material weakness described above. We will continue to devote significant time and attention to these remediation efforts. As we continue to evaluate and work to improve our internal control over financial reporting, management may determine to take additional measures to address the material weakness or determine to modify the remediation plan described above. Until the remediation steps set forth above, including the efforts to implement the necessary control activities that we identify, are fully completed, and there has been time for us to conclude through testing that the control activities are operating effectively, the material weakness described above will not be considered remediated.

Changes in Internal Control over Financial Reporting.

On July 15, 2022, the Company acquired 33,957,538 bearer shares of ADVA, or 65.43% of ADVA’s outstanding bearer shares as of such date, as further described in Note 2 of the Notes to the Condensed Consolidated Financial Statements. On March 31, 2023, ADVA’s assets represented approximately 43.0% of our consolidated assets. For the three months ended March 31, 2023, ADVA’s revenues represented approximately 59.4% of our consolidated revenues and loss before income taxes represented approximately 69.1% of our consolidated loss before income taxes. As permitted by SEC guidance, we currently exclude ADVA in our evaluation of internal control over financial reporting and related disclosure controls and procedures for the first year after the Business Combination. However, we are in the process of extending our oversight and monitoring processes that support our internal control over financial reporting and disclosure controls and procedures to include ADVA’s operations. There were no changes in the Company’s internal control over financial reporting that occurred during the quarter ended March 31, 2023 that have materially affected, or are reasonably likely to materially affect, its internal control over financial reporting.

PART II. OTHER INFORMATION

ITEM 1A. RISK FACTORS

A list of factors that could materially affect our business, financial condition or operating results is described in Part I, Item 1A, “Risk Factors” in the 2022 Form 10-K. There have been no material changes to our risk factors from those disclosed in Part I, Item 1A, “Risk Factors” in the 2022 Form 10-K other than as described in the risk factors below.

Risks related to our financial results and Company success

Our revenue for a particular period can be difficult to predict, and a shortfall in revenue may harm our operating results.

As a result of the many factors discussed in this report, our revenue for a particular quarter is difficult to predict and will fluctuate from quarter to quarter. Typically, our customers request product delivery within a short period following our receipt of an order. Consequently, we do not typically carry a significant order backlog and are dependent upon obtaining orders and completing delivery in accordance with shipping terms that are predominantly within each quarter to achieve our targeted revenue. Supply of semiconductor chips and other components of our products has become constrained resulting in extended lead times and increased costs. Transportation constraints, including shortages for both air and surface freight, as well as labor shortages in the transportation industry, have also affected the timing and the cost of obtaining raw materials and production supplies. As a result, our revenue and gross margin percentage declined in the first quarter of 2023. If supply chain constraints and transportation constraints continue, it could cause our net revenue and gross profit to decline or to grow at a slower rate than in previous quarters. Our deployment/installation cycle can also vary depending on the customer’s schedule, site readiness, network size and complexity and other factors, which can cause our revenue to fluctuate from period to period. Our ability to meet financial expectations could also be affected if the variable revenue patterns seen in prior quarters recur in future quarters. We have experienced periods of time during which manufacturing issues have delayed shipments, leading to variable shipping patterns. In addition, to the extent that manufacturing issues and any related component shortages continue to result in delayed shipments in the future, and particularly in quarters in which we and our subcontractors are operating at higher levels of capacity, it is possible that revenue for a quarter could be adversely affected, and we may not be able to remediate the conditions within the same quarter. Currently, our revenue growth and profitability in the near-term are being impacted by supply chain constraint issues. While we are working closely with our suppliers and customers to address the near-term supply chain challenges facing the industry and believe these challenges will continue to lessen and will begin to normalize during 2023, there can be no assurance this will be the case.

In the past, under certain market conditions, long manufacturing lead times have caused our customers to place the same order multiple times. When multiple ordering occurs, along with other factors, it may cause difficulty in predicting our revenue and, as a result, could impair our ability to manage inventory effectively.

We plan our operating expense levels based primarily on forecasted revenue levels. These expenses and the impact of long-term commitments are relatively fixed in the short term. A shortfall in revenue could lead to operating results being below expectations because we may not be able to quickly reduce these fixed expenses in response to short-term business changes.

Our customers in the subscriber solutions & experience technology category are increasingly focusing on working capital optimization and depletion of overstocked inventories, which have impacted and may continue to materially impact demand in that category.

We expect gross margins to continue to vary over time, and our levels of product and services gross margins may not be sustainable.

Our level of gross margins may not be sustainable and has been and may continue to be adversely affected by numerous factors, including:

•
changes in customer, geographic or product or services mix, including software and the mix of configurations and professional services revenue within each product segment;
•
mix of domestic versus international revenue;
•
introduction of new products by competitors, including products with price-performance advantages;
•
our ability to reduce product cost;
•
increases in labor or material cost, including increases in material costs resulting from inflation or tariffs;
•
foreign currency exchange rate movements;
•
expediting costs incurred to meet customer delivery requirements;
•
excess inventory and inventory holding charges;
•
excess and obsolescence charges;
•
changes in shipment volume;
•
our ability to absorb fixed manufacturing costs during short-term fluctuations in customer demand;
•
loss of cost savings due to changes in component pricing or charges incurred due to inventory holding periods if parts ordering does not correctly anticipate product demand;
•
lower than expected benefits from value engineering;
•
increased price competition, including competitors from Asia, specifically China;
•
changes in distribution channels;
•
increased warranty cost or quality issues;
•
liquidated damages costs relating to customer contractual terms;
•
our ability to manage the impact of foreign currency exchange rate fluctuations relating to our revenue or cost of revenue;
•
slowdowns, recessions, economic instability (such as the instability in the financial services sector), political unrest, armed conflicts (such as the ongoing military conflict in Ukraine), or outbreaks of disease, such as the COVID-19 pandemic, around the world;
•
protracted negotiations regarding the U.S. federal debt ceiling or the U.S. government's failure to raise the debt ceiling; and
•
Business Combination purchase price allocations.

For example, throughout 2022, we incurred increased expenses resulting from supply chain disruptions, including delays in supply chain deliveries and the related global semi-conductor chip shortage, which lowered our gross margins and decreased our profitability. These supply chain challenges and their adverse impact on our industry began to ease during the first quarter of 2023. However, there can be no assurance that the ongoing disruptions due to COVID-19, the related semiconductor chip shortage or other supply chain constraints or price increase will be resolved in the near term, which could continue to adversely affect our business, financial condition, and results of operations.

Risks related to our control environment

We have had to restate our previously issued consolidated financial statements and, as part of that process, have identified a material weakness in our internal control over financial reporting commencing September 30, 2022 and continuing as of the date hereof. If we are unable to develop and maintain effective internal control over financial reporting, we may not be able to accurately report our financial results in a timely manner, which may adversely affect investor confidence in us and may adversely affect our business, financial condition and results of operations.

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. Effective internal control over financial reporting is necessary for us to provide reliable financial reporting and prevent fraud. We continue to evaluate steps to remediate the material weakness. These remediation measures may be time consuming and costly, and there is no assurance that these initiatives will ultimately have the intended effects. Any failure to maintain effective internal control over financial reporting could adversely impact our ability to report our financial position and results from operations on a timely and accurate basis. If our financial statements are not accurate, investors may not have a complete understanding of our operations. Likewise, if our financial statements are not filed on a timely basis, we could be subject to sanctions or investigations by the stock exchange on which our common stock is listed, the SEC or other regulatory authorities. In either case, there could be an adverse effect on our business, financial condition and results of operations. Ineffective internal control over financial reporting could also cause investors to lose confidence in our reported financial information, which could have a negative effect on the trading price of our stock.

We can provide no assurance that the measures we are taking and plan to take in the future will remediate the material weakness identified or that any additional material weaknesses or restatements of financial results will not arise in the future due to a failure to implement and maintain adequate internal control over financial reporting or circumvention of these controls. In addition, even if we are successful in strengthening our controls and procedures, in the future those controls and procedures may not be adequate to prevent or identify irregularities or errors or to facilitate the fair presentation of our consolidated financial statements.

We may face litigation and other risks as a result of the restatement as described in the “Explanatory Note” within this Amendment No. 1 and material weakness in our internal control over financial reporting.

As part of the restatement as described in the “Explanatory Note” within this Amendment No. 1, we identified a material weakness in our internal control over financial reporting. As a result of such material weakness, the restatement and other matters raised or that may in the future be raised by the SEC, we face potential for litigation or other disputes which may include, among others, claims invoking the federal and state securities laws, contractual claims or other claims arising from the restatement and the material weakness in our internal control over financial reporting and the preparation of our financial statements. As of the date of this report, we have no knowledge of any such litigation or dispute. However, we can provide no assurance that such litigation or dispute will not arise in the

future. Any such litigation or dispute, whether successful or not, could adversely affect our business, financial condition and results of operations.

Risks related to the telecommunications industry

Our failure to maintain rights to intellectual property used in our business could adversely affect the development, functionality and commercial value of our products.

Our future success depends in part upon our proprietary technology. Although we attempt to protect our proprietary technology by contract, trademark, copyright and patent registration and internal security, including trade secret protection, these protections may not be adequate. Furthermore, our competitors can develop similar technology independently without violating our proprietary rights. From time to time, we receive and may continue to receive notices of claims alleging that we are infringing upon patents or other intellectual property. Any of these claims, whether with or without merit, could result in significant legal fees, divert our management’s time, attention and resources, delay our product shipments or require us to enter into royalty or licensing agreements. We cannot predict whether we will prevail in any claims or litigation over alleged infringements, or whether we will be able to license any valid and infringed patents, or other intellectual property, on commercially reasonable terms. For example, in May 2023, ADVA filed a lawsuit against Huawei Technologies Co. (“Huawei”), which seeks declaratory relief with respect to, among other items, ADVA North America’s non-infringement of certain allegedly standard essential patents owned by Huawei and Huawei’s violation of its contractual commitments to negotiate in good faith and to license patents on fair, reasonable and non-discriminatory terms and conditions. If a claim of intellectual property infringement against us is successful and we fail to obtain a license or develop or license non-infringing technology, our business, operating results, financial condition and cash flows could be materially adversely affected.

Risks related to the regulatory environments in which we do business

Central Banks' monetary policy actions could increase our costs of borrowing money and negatively impact our financial condition and future operations.

Market interest rates are rising and are expected to continue to rise across the yield curve. Depending on future inflation levels, the rise of nominal interest rates may produce a rise in real interest rates. Higher interest rates resulting from tightening monetary policy are expected to increase credit costs and decrease credit availability. Increases in interest rates could increase our costs of borrowing money under certain of our debt facilities with variable interest rates, which would negatively impact our financial condition and future operations.

We see an increased risk to our liquidity due to the current instability in the financial services industry which could negatively impact our financial condition and future operations. This includes risk relating to our liquidity balances and investments, as well as risk relating to the financial stability of our customers and suppliers. We seek to only enter into transactions with creditworthy banks and financial institutions. To assess the creditworthiness of banks, we utilize current credit ratings from rating agencies, such as S&P, Moodyʼs and Fitch, as well as current default rates (credit default swaps). We are also in frequent dialogue with customers and suppliers to assess counterparty risks. Nevertheless, many of these transactions expose us to credit risk in the event of our counterparty’s default. Any such losses could be material and could materially and adversely affect our business, financial condition and results of operations.

 

ITEM 6. EXHIBITS

Exhibits.

 

Exhibit No.

Description

 

 

3.1

Amended and Restated Certificate of Incorporation of ADTRAN Holdings, Inc. (incorporated by reference to Exhibit 3.1 to the Company's Form 8-K filed July 8, 2022)

 

 

3.2

Amended and Restated Bylaws of ADTRAN Holdings, Inc. (incorporated by reference to Exhibit 3.2 to the Company's Form 8-K filed July 8, 2022)

 

 

4.1

Description of Securities

 

 

10.1†

First Amendment to the CEO Employment Agreement dated March 29, 2023 (incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed April 3, 2023)

 

 

10.2†

Employment Agreement, dated September 29, 2006 and Amendment Nos. 1-16, by and between ADVA Optical Networking SE and Christoph Glingener (incorporated by reference to Exhibit 10.3 to the Company’s Form 8-K filed April 3, 2023)

 

 

10.3†

Seventeenth Amendment, dated March 28, 2023, to Employment Agreement by and between ADVA Optical Networking SE and Christoph Glingener (incorporated by reference to Exhibit 10.2 to the Company’s Form 8-K filed April 3, 2023)

 

 

10.4†

Employment Agreement, dated January 28, 2015, and Amendment Nos. 1-9, by and between ADVA Optical Networking SE and Ulrich Dopfer (incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed March 30, 2023).

 

 

10.5†

Summary of Terms of Assumed Options (incorporated by reference to Exhibit 4.1 to the Company’s Form S-8 filed July 11, 2022)

 

 

10.6†

Amended and Restated Variable Incentive Compensation Plan (incorporated by reference to Exhibit 10.1 of the Company’s Form 8-K filed January 26, 2023)

 

 

10.7†

Form of VICC Award Letter – Quarterly Bonus Program (incorporated by reference to Exhibit 10.2 of the Company’s Form 8-K filed January 26, 2023)

 

 

31*

Rule 13a-14(a)/15d-14(a) Certifications

 

 

32*

Section 1350 Certifications

 

 

101

The following financial statements from the Company’s Quarterly Report on Form 10-Q/A for the quarter ended March 31, 2023, formatted in Inline XBRL: (i) Condensed Consolidated Balance Sheets as of March 31, 2023 and December 31, 2022; (ii) Condensed Consolidated Statements of Loss for the three months ended March 31, 2023 and 2022; (iii) Condensed Consolidated Statements of Comprehensive Loss for the three months ended March 31, 2023 and 2022; (iv) Condensed Consolidated Statements of Changes in Stockholders’ Equity for the three months ended March 31, 2023 and 2022; (v) Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2023 and 2022; and (vi) Notes to Condensed Consolidated Financial Statements

 

 

104

Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

 

 

* Filed herewith.

† Represents a management compensation plan or arrangement

 

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

 

 

ADTRAN Holdings, Inc.

(Registrant)

 

 

 

 

 

 

Date: August 14, 2023

 

/s/ Ulrich Dopfer

 

 

Ulrich Dopfer

 

 

Chief Financial Officer

 

 

(Duly Authorized Officer and Principal Financial

Officer)

 

 

 

 
v3.23.2
Business Combination
 3 Months Ended
Mar. 31, 2023
Business Combinations [Abstract]  
Business Combination

2. BUSINESS COMBINATION

ADVA Optical Networking SE

On August 30, 2021, ADTRAN and ADVA, entered into a Business Combination Agreement, pursuant to which both companies agreed to combine their respective businesses and each become subsidiaries of a new holding company, ADTRAN Holdings, Inc. (formerly known as Acorn HoldCo, Inc.) which was formed as a wholly-owned subsidiary of ADTRAN in order to consummate the transactions under the Business Combination Agreement. Under the terms of the Business Combination Agreement, on July 8, 2022, Acorn MergeCo, Inc, a Delaware corporation and wholly-owned direct subsidiary of the Company, merged with and into ADTRAN, Inc. leaving ADTRAN, Inc. surviving the merger as a wholly-owned direct subsidiary of the Company.

Additionally, pursuant to the Business Combination Agreement, on July 15, 2022, the Company made a public offer to exchange each issued and outstanding no-par value bearer share of ADVA for 0.8244 shares of Company Common Stock, par value $0.01 per share of the Company. The Exchange Offer was settled on Exchange Offer Settlement Date, on which date the Company acquired 33,957,538 bearer shares of ADVA, or 65.43% of ADVA’s outstanding bearer shares as of the Exchange Offer Settlement Date, in exchange for the issuance of an aggregate of 27,994,595 shares of Company Common Stock. Additionally, pursuant to the Business Combination Agreement, ADVA stock option holders were entitled to have their ADVA stock options assumed by ADTRAN Holdings, Inc. (applying the exchange ratio in the Business Combination Agreement), thereafter representing options to acquire stock of ADTRAN, Inc. The fair value of the ADVA stock options assumed by ADTRAN, Inc. was $12.8 million, estimated using the Monte Carlo method.

ADTRAN, Inc. and ADVA became subsidiaries of ADTRAN Holdings, Inc. as a result of the Business Combination. ADTRAN was determined to be the accounting acquirer of ADVA based on ADTRAN shareholders’ majority equity stake in the combined company, the composition of the board of directors and senior management of the combined company, among other factors. The Business Combination with ADVA has been accounted for using the acquisition method of accounting as per the provisions of Accounting Standards Codification 805, “Business Combinations” (“ASC 805”). The Business Combination Agreement used a fixed exchange ratio of Company Common Stock for ADVA shares of common stock, which resulted in a 36% equity stake for ADVA stockholders and a 64% equity stake for ADTRAN stockholders in the post-closing combined company (calculated on a fully diluted basis and utilizing the tender of 65.43% of ADVA’s current issued and outstanding share capital) as of July 15, 2022. Therefore, ADTRAN shareholders continued to hold a majority interest in the combined company following the completion of the Business Combination. Additionally, the Board of Directors is comprised of six members from ADTRAN and three members from ADVA; the current ADTRAN chief executive officer acts as the chairman of the Board of Directors and the former ADVA chief executive officer as the vice chairman of the Board of Directors. Additionally, the current ADTRAN chief executive officer and ADTRAN chief financial officer held these positions within the combined company immediately following the completion of the Business Combination. Based upon these and other considerations as outlined in ASC 805, ADTRAN represents the accounting acquirer.

The following table summarizes the purchase price for the ADVA business combination:

 

(In thousands, except shares, share price and exchange ratio)

 

Purchase Price

 

ADVA shares exchanged

 

 

33,957,538

 

Exchange ratio

 

 

0.8244

 

ADTRAN Holdings, Inc. shares issued

 

 

27,994,595

 

ADTRAN Holdings, Inc. share price on July 15, 2022

 

$

20.20

 

Purchase price paid for ADVA shares

 

$

565,491

 

Equity compensation (1)

 

$

12,769

 

Total purchase price

 

$

578,260

 

(1) Represents the portion of replacement share-based payment awards that relates to pre-combination vesting.

Assets acquired and liabilities assumed were recognized at their respective fair values as of July 15, 2022. In determining the fair value, the Company utilized various methods of the income, cost and market approaches depending on the asset or liability being fair valued. The estimation of fair value required significant judgment related to future net cash flows reflecting the risk inherent in each cash flow stream, competitive trends, market comparables and other factors. Inputs were generally determined by taking into account historical data, current and anticipated market conditions, and growth rates.

Developed technology and customer relationships were valued using the multi-period excess earnings method. Backlog was valued using the distributor method. Significant assumptions used in the discounted cash flow analysis for (i) developed technology were the revenue growth rates, long-term revenue growth rate, discount rate, and earnings before interest, taxes, depreciation and amortization (“EBITDA”) margins, obsolescence factors, income tax rate, tax depreciation, and economic depreciation; (ii) customer relationships were earnings before interest and taxes (“EBIT”) margins, contributory asset charges, and customer attrition rate; and (iii) backlog were EBIT margins, adjusted EBIT margins, and contributory asset charges.

The allocation of the purchase price to the assets acquired and liabilities assumed was subject to adjustment within the measurement period (up to one year from the acquisition date). The measurement period adjustments since initial preliminary estimates resulted from changes to the fair value estimates of the acquired assets and assumed liabilities based on finalizing the valuations of inventory, prepaid expenses and other current assets, property plant and equipment, intangible assets, other non-current assets and deferred tax assets and liabilities. The cumulative effect of all measurement period adjustments resulted in a decrease to recognized goodwill of $8.7 million.

 

The following table summarizes the purchase price allocation for each major class of assets acquired and liabilities assumed in the acquisition of ADVA (in thousands):

 

(In thousands)

 

 

 

Total purchase price

 

$

578,260

 

Non-controlling interest

 

$

316,415

 

Net Assets:

 

 

 

Cash and cash equivalents

 

$

44,003

 

Accounts receivable

 

 

114,659

 

Other receivables

 

 

1,457

 

Inventory

 

 

200,331

 

Prepaid expenses and other current assets

 

 

28,208

 

Property plant and equipment

 

 

55,480

 

Deferred tax assets

 

 

1,759

 

Intangibles

 

 

403,780

 

Other non-current assets

 

 

31,074

 

Accounts payable

 

 

(98,587

)

Current unearned revenue

 

 

(26,047

)

Accrued expenses and other liabilities

 

 

(59,600

)

Current portion of notes payable

 

 

(25,254

)

Income tax payable, net

 

 

(4,898

)

Tax liabilities

 

 

(1,400

)

Non-current unearned revenue

 

 

(11,498

)

Pension liability

 

 

(6,820

)

Other non-current liabilities

 

 

(6,094

)

Non-current portion of revolving credit agreements and notes payable

 

 

(15,250

)

Non-current lease obligations

 

 

(20,046

)

Deferred tax liabilities

 

 

(61,040

)

Total net assets acquired

 

$

544,217

 

Goodwill

 

$

350,458

 

The fair value of the assets acquired include accounts receivable of $114.7 million and other receivables of $1.5 million. The unpaid principal balance under these receivables is $118.5 million and $1.5 million, respectively. The difference between the fair value and the unpaid principal balance primarily represents amounts expected to be uncollectible.

The fair value of the identifiable intangible assets acquired as of the acquisition date:

 

(In thousands)

Estimated-average useful life (in years) (1)

 

 

Fair value

 

 

Income Statement Amortization Classification

Developed technology

 

8.5

 

 

$

291,925

 

 

 Cost of revenue - Network Solutions

Backlog

 

1.4

 

 

 

52,165

 

 

 Cost of revenue - Network Solutions and Services & Support

Customer relationships

 

10.5

 

 

 

32,704

 

 

 Selling, general and administrative expenses

Trade name

 

2.8

 

 

 

26,986

 

 

 Selling, general and administrative expenses

Total

 

 

 

$

403,780

 

 

 

 

(1) Determination of the weighted average period of the individual categories of intangible assets was based on the nature of the applicable intangible asset and the expected future cash flows to be derived from the intangible asset. Amortization of intangible assets with definite lives is recognized over the period of time the assets are expected to contribute to future cash flows.

Goodwill represents the excess of the purchase price over the fair value of the net tangible and intangible assets acquired. The ADVA acquisition resulted in the recognition of goodwill of $350.5 million, which the Company believes is attributable to the value driven by the Company’s expected growth of the business, synergies, and expanded market and product opportunities. Goodwill created as a result of the ADVA acquisition is not deductible for tax purposes.

After the Business Combination, the chief operating decision maker assessed and will continue to assess the Company’s performance and allocate resources to its two segments (1) Network Solutions and (2) Services & Support. The goodwill resulting from the Business Combination of $272.8 million was allocated to the Network Solutions segment, and $77.7 million was allocated to the Services & Support segment. See Note 18 of the Notes to Consolidated Financial Statements, included in this Amendment No. 1 for more information about the Company’s segments.

As of the acquisition date, the fair value of the non-controlling interest was approximately $316.4 million and determined using a market approach. As a portion of ADVA shares will remain trading after the Business Combination, the non-controlling interest was calculated using 17,941,496 ADVA shares held by non-controlling interest multiplied by the ADVA closing share price of €17.58 ($17.64 using the July 15, 2022 EUR to USD conversion rate of $1.00318) on July 15, 2022.

The Company included the financial results of ADVA in its consolidated financial statements since July 15, 2022, the acquisition date. The net revenue and net loss from the ADVA business for the period January 1, 2023 to March 31, 2023, were $192.3 million and $25.4 million, respectively, which are included in the Company’s Consolidated Statement of Loss. The net loss attributable to non-controlling interest from the ADVA business for the three months ended March 31, 2023 was $6.0 million.

As of March 31, 2023, the Company has incurred $26.1 million of transaction costs related to the Business Combination. During the three months ended March 31, 2023, we did not incur transaction costs related to the Business Combination. During the three months ended March 31, 2022, $1.5 million of transaction costs were incurred. These transaction costs are recorded in selling, general and administrative expense in the Consolidated Statements of Loss.

Supplemental Pro Forma Information (Unaudited)

The unaudited pro forma financial information in the table below summarizes the combined results of operations for ADTRAN and ADVA as though the Business Combination had occurred on January 1, 2022. The pro forma amounts have been adjusted for differences in basis of accounting which are determined before taking into effect the impacts of purchase accounting and Business Combination accounting impacts.

The following unaudited pro forma information is presented for illustrative purposes only. It is not necessarily indicative of the results of operations of future periods, the results of operations that actually would have been realized had the entities been a single company as of January 1, 2022, or the future operating results of the combined entities. The unaudited pro forma information does not give effect to the potential impact of current financial conditions, regulatory matters or any anticipated synergies, operating efficiencies or cost savings that may be associated with the acquisition. The unaudited pro forma information also does not include any integration costs that the Company may incur related to the acquisition as part of combining the operations of the companies.

 

 

Three Months Ended

 

(In thousands)

March 31, 2022

 

 

 

 

Revenue

$

345,844

 

Net loss

$

(73,489

)
v3.23.2
Revenue
 3 Months Ended
Mar. 31, 2023
Revenue from Contract with Customer [Abstract]  
Revenue

3. REVENUE

The following is a description of the principal activities from which revenue is generated by reportable segment:

Network Solutions Segment - Includes hardware and software products that enable a digital future which support the Company's Subscriber, Access and Aggregation, and Optical Networking Solutions.

Services & Support Segment - Includes network design, implementation, maintenance and cloud-hosted services supporting the Company's Subscriber, Access and Aggregation, and Optical Networking Solutions.

Revenue by Category

In addition to the Company's reportable segments, revenue is also reported for the following three categories – Subscriber Solutions, Access & Aggregation Solutions and Optical Networking Solutions.

Prior to the Business Combination with ADVA on July 15, 2022, ADTRAN reported revenue across the following three categories: (1) Access & Aggregation, (2) Subscriber Solutions & Experience and (3) Traditional & Other Products. Following the Business Combination with ADVA, we have recast these revenues such that ADTRAN’s former Access & Aggregation revenue is combined with a portion of the applicable ADVA solutions to create Access & Aggregation Solutions, ADTRAN’s former Subscriber Solutions & Experience revenue is combined with a portion of the applicable ADVA solutions to create Subscriber Solutions, and the revenue from Traditional & Other products is now included in the applicable Access & Aggregation Solutions or Subscriber Solutions category. Optical Networking Solutions is a new revenue category added to represent a meaningful portion of ADVA’s portfolio.

Our Subscriber Solutions portfolio is used by Service Providers to terminate their access services infrastructure at the customer premises while providing an immersive and interactive experience for residential, business and wholesale subscribers. This revenue category includes hardware- and software-based products and services. These solutions include fiber termination solutions for residential, business and wholesale subscribers, Wi-Fi access solutions for residential and business subscribers, Ethernet switching and network edge virtualization solutions for business subscribers, and cloud software solutions covering a mix of subscriber types.

Our Access & Aggregation Solutions are solutions that are used by communications Service Providers to connect residential subscribers, business subscribers and mobile radio networks to the Service Providers’ metro network, primarily through fiber-based connectivity. This revenue category includes hardware- and software-based products and services. Our solutions within this category are a mix of fiber access and aggregation platforms, precision network synchronization and timing solutions, and access orchestration solutions that ensure highly reliable and efficient network performance.

Our Optical Networking Solutions are used by communications Service Providers, internet content providers and large-scale enterprises to securely interconnect metro and regional networks over fiber. This revenue category includes hardware- and software-based products and services. Our solutions within this category include open optical terminals, open line systems, optical subsystems and modules, network infrastructure assurance systems, and automation platforms that are used to build high-scale, secure and assured optical networks.

The following table disaggregates revenue by reportable segment and revenue category. Prior year amounts presented below have been reclassified to conform to the current period revenue category presentation:

 

 

 

Three Months Ended

 

 

 

March 31, 2023

 

 

March 31, 2022

 

(In thousands)

 

Network Solutions

 

 

Services & Support

 

 

Total

 

 

Network Solutions

 

 

Services & Support

 

 

Total

 

Subscriber Solutions

 

$

70,287

 

 

$

9,049

 

 

$

79,336

 

 

$

52,390

 

 

$

4,332

 

 

$

56,722

 

Access & Aggregation Solutions

 

 

84,554

 

 

 

12,266

 

 

 

96,820

 

 

 

85,984

 

 

 

11,812

 

 

 

97,796

 

Optical Networking Solutions

 

 

127,577

 

 

 

20,179

 

 

 

147,756

 

 

 

—

 

 

 

—

 

 

 

—

 

Total

 

$

282,418

 

 

$

41,494

 

 

$

323,912

 

 

$

138,374

 

 

$

16,144

 

 

$

154,518

 

 

The aggregate amount of transaction price allocated to remaining performance obligations that have not been satisfied as of March 31, 2023 and December 31, 2022 related to contractual maintenance agreements, contractual SaaS and subscription services, and hardware contracts that exceed one year in duration amounted to $389.0 million and $277.2 million, respectively. As of March 31, 2023, approximately 68% is expected to be recognized over the next 12 months and the remainder recognized thereafter. The majority of the Company's remaining performance obligations as of March 31, 2023 are related to contracts or orders that have an original expected duration of one year or less, for which the Company is electing to utilize the practical expedient available within the guidance, and are excluded from the transaction price related to these future obligations. The Company will generally satisfy the remaining performance obligations as we transfer control of the products ordered or services to our customers, excluding maintenance services, which are satisfied over time.

The following table provides information about receivables, contract assets and unearned revenue from contracts with customers:

 

 

 

As of

 

 

As of

 

(In thousands)

 

March 31, 2023

 

 

December 31, 2022

 

Accounts receivable, net

 

$

262,043

 

 

$

279,435

 

Contract assets(1)

 

$

1,972

 

 

$

1,852

 

Unearned revenue

 

$

55,611

 

 

$

41,193

 

Non-current unearned revenue

 

$

24,907

 

 

$

19,239

 

 

(1) Included in other receivables on the Condensed Consolidated Balance Sheets.

The Company is party to a receivables purchase agreement with a third party financial institution (the “Factor”). As of March 31, 2023 and December 31, 2022, accounts receivable totaling $15.6 million and $14.9 million, respectively, were sold, of which $1.2 million was retained by the Factor in the reserve account. The balance in the reserve account is included in other assets on the Condensed Consolidated Balance Sheets. As of March 31, 2023 and December 31, 2022, the Company had an allowance for doubtful accounts related to factored accounts receivable totaling less than $0.1 million. The cost of receivables purchase agreement is included in interest expense in the Condensed Consolidated Statements of Loss and totaled $0.3 million for the three months ended March 31, 2023.

Of the outstanding unearned revenue balances as of December 31, 2022, $25.6 million was recognized as revenue during the three months ended March 31, 2023. Of the $17.7 million of outstanding unearned revenue balances as of December 31, 2021, $5.4 million was recognized as revenue during the three months ended March 31, 2022.

Accounts Receivable

The Company records accounts receivable in the normal course of business as products are shipped or services are performed and invoiced, but payment has not yet been remitted by the customer. Accounts receivable balances are considered past due when payment has not been received by the date indicated on the relevant invoice or based on agreed upon terms between the customer and the Company.

As of March 31, 2023 and December 31, 2022, the Company’s outstanding accounts receivable balance was $262.0 million and $279.4 million, respectively. The Company assessed the need for an allowance for credit losses related to its outstanding accounts receivable using the historical loss-rate method as well as assessing asset-specific risks. The assessment of asset-specific risks included the evaluation of relevant available information, from internal and external sources, relating to current conditions that may affect a customer’s ability to pay, such as the customer’s current financial condition, credit rating by geographic location, as provided by a third party and/or by customer, if needed, and the overall macro-economic conditions in which the customer operates. The Company pooled assets by geographic location to determine if an allowance should be applied to its accounts receivable balance, assessing the specific country risk rating and overall economics of that particular country. If elevated risk existed, or customer specific risk indicated the accounts receivable balance was at risk, the Company further analyzed the need for an allowance related to specific accounts receivable balances. Additionally, the Company determined that significant changes to customer country risk rating from period-to-period and from the end of the prior year to the end of the current quarter would require further review and analysis by the Company.

The allowance for credit losses was $0.1 million and $49 thousand as of March 31, 2023 and December 31, 2022, respectively, related to accounts receivable.

Contract Assets

The Company records contract assets when it has recognized revenue but has not yet billed the customer. As of March 31, 2023 and December 31, 2022, the Company’s outstanding contract asset balance was $2.0 million and $1.9 million, respectively, which is included in other receivables on the Consolidated Balance Sheets. The Company assessed the need for an allowance for credit losses related to its outstanding contract assets using the historical loss-rate method as well as asset-specific risks. The Company’s historical losses related to contract assets receivable have been immaterial as evidenced by historical write-offs due to collectability. Asset-specific risk included the evaluation of relevant available information, from internal and external sources, relating to current conditions that may affect a customer’s ability to pay once invoiced, such as the customer’s financial condition, credit rating by geographic location as provided by a third party and/or by customer, if needed, and the overall macro-economic conditions in which the customer operates. The Company pooled assets by geographic location to determine if an allowance should be applied to its contract asset balance, assessing the specific country risk rating and the overall economics of that particular country. If elevated risk existed, or customer specific risk indicated the contract balance was at risk, the Company further analyzed the need for an allowance related to specific customer balances. Additionally, the Company determined that significant changes to customer country risk rating from period-to-period and from the end of the prior year to the end of the current quarter would be subject to further review and analysis by the Company.

No allowance for credit losses was recorded for the three months ended March 31, 2023 and 2022 related to contract assets.

v3.23.2
Income Taxes
 3 Months Ended
Mar. 31, 2023
Income Tax Disclosure [Abstract]  
Income Taxes

4. INCOME TAXES

The Company's effective tax rate changed from a benefit of 68.1% of pre-tax income for the three months ended March 31, 2022, to a benefit of 21.9% of pre-tax income for the three months ended March 31, 2023. The change in the effective tax rate for the three months ended March 31, 2023, was driven primarily by a change in our estimated tax rate as a result of the closing of the Business Combination with ADVA during the third quarter of 2022, as well as the release of our domestic valuation allowance during the fourth quarter of 2022.

The Company continually reviews the adequacy of its valuation allowance and recognizes the benefits of deferred tax assets only as the assessment indicates that it is more likely than not that the deferred tax assets will be recognized in accordance with ASC 740, Income Taxes. As of March 31, 2023, the Company had net deferred tax assets totaling $35.0 million, and a valuation allowance totaling $5.2 million against those deferred tax assets. The remaining $29.8 million in deferred tax assets are primarily related to capitalized R&D expenses in the U.S., partially offset by net purchase price intangibles from the Business Combination closed with ADVA during the third quarter of 2022. Our assessment of the realizability of our deferred tax assets includes the evaluation of historical operating results as well as the evaluation of evidence which requires significant judgment, including the evaluation of our three-year cumulative income position, future taxable income projections and tax planning strategies. Should management’s conclusion change in the future and an additional valuation allowance, or a partial or full release of the valuation allowance becomes necessary, it may have a material effect on our consolidated financial statements.

 

Supplemental balance sheet information related to deferred tax assets (liabilities) is as follows:

 

 

 

As of March 31, 2023

 

(In thousands)

 

Deferred Tax Assets (Liabilities)

 

 

Valuation Allowance

 

 

Deferred Tax Assets (Liabilities), net

 

Domestic

 

$

75,432

 

 

$

(3,177

)

 

$

72,255

 

International

 

 

(40,450

)

 

 

(2,024

)

 

 

(42,474

)

Total

 

$

34,982

 

 

$

(5,201

)

 

$

29,781

 

 

 

 

As of December 31, 2022

 

(In thousands)

 

Deferred Tax Assets (Liabilities)

 

 

Valuation Allowance

 

 

Deferred Tax Assets (Liabilities), net

 

Domestic

 

$

61,726

 

 

$

(3,177

)

 

$

58,549

 

International

 

 

(50,315

)

 

 

(2,024

)

 

 

(52,339

)

Total

 

$

11,411

 

 

$

(5,201

)

 

$

6,210

 
v3.23.2
Stock-Based Compensation
 3 Months Ended
Mar. 31, 2023
Share-Based Payment Arrangement [Abstract]  
Stock-Based Compensation

5. STOCK-BASED COMPENSATION

For the three months ended March 31, 2023 and 2022, stock-based compensation expense was $2.6 million and $1.9 million, respectively.

PSUs, RSUs and Restricted Stock - ADTRAN Holdings, Inc.

The following table summarizes the RSUs and restricted stock outstanding as of December 31, 2022 and March 31, 2023 and the changes that occurred during the three months ended March 31, 2023:

 

 

 

Number of
Shares
(in thousands)

 

 

Weighted Avg. Grant Date Fair Value
(per share)

 

Unvested RSUs and restricted stock outstanding, December 31, 2022

 

 

1,086

 

 

$

17.54

 

RSUs and restricted stock granted

 

 

1,296

 

 

$

17.60

 

RSUs and restricted stock vested

 

 

(12

)

 

$

20.51

 

RSUs and restricted stock forfeited

 

 

(10

)

 

$

15.32

 

Unvested RSUs and restricted stock outstanding, March 31, 2023

 

 

2,360

 

 

$

17.65

 

 

During the three months ended March 31, 2023, the Company granted 0.7 million performance-based PSUs to its executive officers and certain employees. The grant-date fair value of these performance-based awards was based on the closing price of the Company’s stock on the date of grant. These awards vest over a three-year period, subject to the grantee’s continued employment, with the ability to earn shares in a range of 0% to 150% of the awarded number of PSUs based on the achievement of defined performance targets. Equity-based compensation expense with respect to these awards may be adjusted over the vesting period to reflect the probability of achievement of performance targets defined in the award agreements.

During the three months ended March 31, 2023, the Company granted 0.1 million performance-based PSUs to its executive officers. The grant-date fair value of these performance-based awards was based on the closing price of the Company’s stock on the date of grant. These awards vest over a two-year period, subject to the grantee’s continued employment, with the ability to earn shares in a range of 0% to 100% of the awarded number of PSUs based on the achievement of defined performance targets. Equity-based compensation expense with respect to these awards may be adjusted over the vesting period to reflect the probability of achievement of performance targets defined in the award agreements.

The fair value of RSUs and restricted stock is equal to the closing price of its stock on the date of grant. The fair value of PSUs with market conditions is calculated using a Monte Carlo simulation valuation method.

As of March 31, 2023, total unrecognized compensation expense related to non-vested market-based RSUs and restricted stock was approximately $24.6 million, which will be recognized over the remaining weighted-average period of 2.6 years. There was $11.9 million of unrecognized compensation expense related to unvested 2023 performance-based PSUs, which will be recognized over the remaining requisite service period of 2.6 years if achievement of the performance obligation becomes probable. Unrecognized compensation expense will be adjusted for actual forfeitures.

As of March 31, 2023, 2.0 million shares were available for issuance under stockholder-approved equity plans.

Stock Options - ADTRAN Holdings, Inc.

The following table summarizes ADTRAN Holdings, Inc. stock options outstanding as of December 31, 2022 and March 31, 2023 and the changes that occurred during the three months ended March 31, 2023:

 

 

Number of
Stock Options
(in thousands)

 

 

Weighted Avg.
Exercise Price
(per share)

 

 

Weighted Avg.
Remaining
Contractual
Life
(in years)

 

 

Aggregate
Intrinsic Value
(in thousands)

 

Stock options outstanding, December 31, 2022

 

 

3,148

 

 

$

14.37

 

 

 

3.42

 

 

$

16,251

 

Stock options exercised

 

 

(6

)

 

$

9.82

 

 

 

 

 

 

 

Stock options forfeited

 

 

(21

)

 

$

12.21

 

 

 

 

 

 

 

Stock options expired

 

 

(7

)

 

$

19.00

 

 

 

 

 

 

 

Stock options outstanding, March 31, 2023

 

 

3,114

 

 

$

14.38

 

 

 

3.17

 

 

$

10,198

 

Stock options exercisable, March 31, 2023

 

 

1,698

 

 

$

15.96

 

 

 

1.70

 

 

$

4,436

 

As of March 31, 2023, there was $7.3 million of unrecognized compensation expense related to stock options which will be recognized over the remaining weighted-average period of 2.2 years.

Pursuant to the Business Combination, which closed on July 15, 2022, ADVA stock option holders were entitled to have their ADVA stock options assumed by ADTRAN Holdings, Inc. (applying the exchange ratio in the Business Combination Agreement), thereafter representing options to acquire stock of ADTRAN Holdings, Inc. The maximum number of shares of ADTRAN Holdings, Inc. stock potentially issuable upon such assumption was 2.3 million shares. The period in which such options could be assumed ended July 22, 2022. A total of 2.1 million shares of ADTRAN Holdings, Inc. stock could be subject to assumed ADVA options. The determination of the fair value of stock options assumed by ADTRAN Holdings, Inc. was estimated using the Monte Carlo method and is affected by its stock price, as well as assumptions regarding a number of complex and subjective variables that may have a significant impact on the fair value estimate. The stock option pricing model requires the use of several assumptions that impact the fair value estimate. These variables include, but are not limited to, the volatility of the Company's stock price and employee exercise behaviors.

All of the options were previously issued at exercise prices that approximated fair market value at the date of grant.

The aggregate intrinsic value of stock options represents the total pre-tax intrinsic value (the difference between ADTRAN’s closing stock price on the last trading day of the quarter and the exercise price, multiplied by the number of in-the-money options) that would have been received by the option holders had all option holders exercised their options on March 31, 2023. The amount of aggregate intrinsic value was $10.2 million as of March 31, 2023 and will change based on the fair market value of ADTRAN’s stock. The total pre-tax intrinsic value of options exercised during the three months ended March 31, 2023 was $43 thousand.

Stock Options - ADVA Optical Networking SE

The following table summarizes ADVA Optical Networking SE stock options outstanding as of December 31, 2022 and March 31, 2023 and the changes that occurred during the three months ended March 31, 2023:

 

 

 

Number of
Options
(In thousands)

 

 

Weighted
Average
Exercise Price
(Per share)

 

 

Weighted Avg.
Remaining
Contractual Life
in Years

 

 

Aggregate
Intrinsic Value
(In thousands)

 

Stock options outstanding, December 31, 2022

 

 

81

 

 

$

8.58

 

 

 

4.00

 

 

$

1,222

 

Stock options exercised

 

 

—

 

 

$

—

 

 

 

 

 

 

 

Stock options forfeited

 

 

—

 

 

$

—

 

 

 

 

 

 

 

Stock options outstanding, March 31, 2023

 

 

81

 

 

$

8.67

 

 

 

3.75

 

 

$

1,198

 

Stock options exercisable, March 31, 2023

 

 

27

 

 

$

7.45

 

 

 

2.14

 

 

$

424

 

As of March 31, 2023, there was $0.1 million of unrecognized compensation expense related to stock options which will be recognized over the remaining weighted-average period of 3.8 years.

All of the options were previously issued at exercise prices that approximated fair market value at the date of grant.

The aggregate intrinsic value of stock options represents the total pre-tax intrinsic value (the difference between ADVA's closing stock price on the last trading day of the quarter and the exercise price, multiplied by the number of in-the-money options) that would have been received by the option holders had all option holders exercised their options on March 31, 2023. The amount of aggregate intrinsic value was $1.2 million as of March 31, 2023 and will change based on the fair market value of ADVA's stock.
v3.23.2
Investments
 3 Months Ended
Mar. 31, 2023
Investments, Debt and Equity Securities [Abstract]  
Investments

6. INVESTMENTS

Debt Securities and Other Investments

The following debt securities and other investments were included on the Condensed Consolidated Balance Sheets and recorded at fair value:

 

 

 

As of March 31, 2023

 

 

 

Amortized

 

 

Gross Unrealized

 

 

Fair

 

(In thousands)

 

Cost

 

 

Gains

 

 

Losses

 

 

Value

 

Corporate bonds

 

$

2,218

 

 

$

4

 

 

$

(63

)

 

$

2,159

 

Municipal fixed-rate bonds

 

 

185

 

 

 

—

 

 

 

(4

)

 

 

181

 

Asset-backed bonds

 

 

734

 

 

 

1

 

 

 

(20

)

 

 

715

 

Mortgage/Agency-backed bonds

 

 

1,699

 

 

 

1

 

 

 

(82

)

 

 

1,618

 

U.S. government bonds

 

 

4,299

 

 

 

5

 

 

 

(151

)

 

 

4,153

 

Foreign government bonds

 

 

406

 

 

 

—

 

 

 

(19

)

 

 

387

 

Available-for-sale debt securities held at fair value

 

$

9,541

 

 

$

11

 

 

$

(339

)

 

$

9,213

 

 

 

 

As of December 31, 2022

 

 

 

Amortized

 

 

Gross Unrealized

 

 

Fair

 

(In thousands)

 

Cost

 

 

Gains

 

 

Losses

 

 

Value

 

Corporate bonds

 

$

2,538

 

 

$

5

 

 

$

(81

)

 

$

2,462

 

Municipal fixed-rate bonds

 

 

185

 

 

 

—

 

 

 

(5

)

 

 

180

 

Asset-backed bonds

 

 

818

 

 

 

1

 

 

 

(24

)

 

 

795

 

Mortgage/Agency-backed bonds

 

 

1,853

 

 

 

—

 

 

 

(105

)

 

 

1,748

 

U.S. government bonds

 

 

3,870

 

 

 

3

 

 

 

(188

)

 

 

3,685

 

Foreign government bonds

 

 

407

 

 

 

—

 

 

 

(24

)

 

 

383

 

Available-for-sale debt securities held at fair value

 

$

9,671

 

 

$

9

 

 

$

(427

)

 

$

9,253

 

 

The contractual maturities related to debt securities and other investments were as follows:

 

 

 

As of March 31, 2023

(In thousands)

 

Corporate
bonds

 

 

Municipal
fixed-rate
bonds

 

 

Asset-
backed
bonds

 

 

Mortgage/
Agency-
backed bonds

 

 

U.S. government
bonds

 

 

Foreign government bonds

 

 

Less than one year

 

$

369

 

 

$

181

 

 

$

—

 

 

$

—

 

 

$

508

 

 

$

—

 

 

One to two years

 

 

966

 

 

 

—

 

 

 

169

 

 

 

166

 

 

 

3,174

 

 

 

387

 

 

Two to three years

 

 

824

 

 

 

—

 

 

 

49

 

 

 

600

 

 

 

348

 

 

 

—

 

 

Three to five years

 

 

—

 

 

 

—

 

 

 

337

 

 

 

242

 

 

 

123

 

 

 

—

 

 

Five to ten years

 

 

—

 

 

 

—

 

 

 

—

 

 

 

238

 

 

 

—

 

 

 

—

 

 

More than ten years

 

 

—

 

 

 

—

 

 

 

160

 

 

 

372

 

 

 

—

 

 

 

—

 

 

Total

 

$

2,159

 

 

$

181

 

 

$

715

 

 

$

1,618

 

 

$

4,153

 

 

$

387

 

 

 

Actual maturities may differ from contractual maturities as some borrowers have the right to call or prepay obligations with or without call or prepayment penalties.

Realized gains and losses on sales of debt securities are computed under the specific identification method. The following table presents the gross realized gains and losses related to its debt securities:

 

 

 

Three Months Ended

 

 

 

March 31,

 

(In thousands)

 

2023

 

 

2022

 

     Gross realized gain on debt securities

 

$

4

 

 

$

12

 

     Gross realized loss on debt securities

 

 

(11

)

 

 

(40

)

Total (loss) gain recognized, net

 

$

(7

)

 

$

(28

)

Income generated from available-for-sale debt securities was recorded as interest and dividend income in the Condensed Consolidated Statements of Loss. No allowance for credit losses was recorded for the three months ended March 31, 2023 and 2022 related to available-for-sale debt securities. The Company’s investment policy provides limitations for issuer concentration, which limits, at the time of purchase, the concentration in any one issuer to 5% of the market value of its total investment portfolio. The Company did not purchase any available-for-sale debt security with credit deterioration during the three months ended March 31, 2023.

Realized and unrealized gains and losses related to marketable equity securities were as follows:

 

 

 

Three Months Ended

 

 

 

March 31,

 

(In thousands)

 

2023

 

 

2022

 

     Realized (loss) gain on equity securities sold

 

$

13

 

 

$

(25

)

     Unrealized (loss) gain on equity securities held

 

 

1,246

 

 

 

(3,362

)

Total (loss) gain recognized, net

 

$

1,259

 

 

$

(3,387

)

 

Income generated from marketable equity securities was recorded as interest and dividend income in the Condensed Consolidated Statements of Loss. U.S. GAAP establishes a three-level valuation hierarchy based upon observable and unobservable inputs for fair value measurement of financial instruments:


• Level 1 – Observable outputs; values based on unadjusted quoted prices for identical assets or liabilities in an active market;

• Level 2 – Significant inputs that are observable; values based on quoted prices in markets that are not active or model inputs that are observable either directly or indirectly;

• Level 3 – Significant unobservable inputs; values based on prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement. These inputs could include information supplied by investees.

The Company’s cash equivalents and investments held at fair value are categorized into this hierarchy as follows:

 

 

 

 

 

 

Fair Value Measurements as of March 31, 2023 Using

 

(In thousands)

 

Fair Value

 

 

Quoted Prices
in Active
Market for
Identical
Assets
(Level 1)

 

 

Significant
Other
Observable
Inputs
(Level 2)

 

 

Significant Unobservable Inputs
(Level 3)

 

Cash equivalents

 

 

 

 

 

 

 

 

 

 

 

 

US government securities

 

$

175

 

 

$

175

 

 

$

—

 

 

$

—

 

Money market funds

 

 

243

 

 

 

243

 

 

 

—

 

 

 

—

 

Available-for-sale debt securities

 

 

 

 

 

 

 

 

 

 

 

 

Corporate bonds

 

 

2,159

 

 

 

—

 

 

 

2,159

 

 

 

—

 

Municipal fixed-rate bonds

 

 

181

 

 

 

—

 

 

 

181

 

 

 

—

 

Asset-backed bonds

 

 

715

 

 

 

—

 

 

 

715

 

 

 

—

 

Mortgage/Agency-backed bonds

 

 

1,618

 

 

 

—

 

 

 

1,618

 

 

 

—

 

U.S. government bonds

 

 

4,153

 

 

 

4,153

 

 

 

—

 

 

 

—

 

Foreign government securities

 

 

387

 

 

 

—

 

 

 

387

 

 

 

—

 

Marketable equity securities

 

 

 

 

 

 

 

 

 

 

 

 

Marketable equity securities – various industries

 

 

821

 

 

 

821

 

 

 

—

 

 

 

—

 

Deferred compensation plan assets

 

 

24,013

 

 

 

24,013

 

 

 

—

 

 

 

—

 

Total

 

$

34,465

 

 

$

29,405

 

 

$

5,060

 

 

$

—

 

 

 

 

 

 

 

 

Fair Value Measurements as of December 31, 2022 Using

 

(In thousands)

 

Fair Value

 

 

Quoted Prices
in Active
Market for
Identical
Assets
(Level 1)

 

 

Significant
Other
Observable
Inputs
(Level 2)

 

 

Significant Unobservable Inputs
(Level 3)

 

Cash equivalents

 

 

 

 

 

 

 

 

 

 

 

 

Money market funds

 

$

228

 

 

$

228

 

 

$

—

 

 

$

—

 

Available-for-sale debt securities

 

 

 

 

 

 

 

 

 

 

 

 

Corporate bonds

 

 

2,462

 

 

 

—

 

 

 

2,462

 

 

 

—

 

Municipal fixed-rate bonds

 

 

180

 

 

 

—

 

 

 

180

 

 

 

—

 

Asset-backed bonds

 

 

795

 

 

 

—

 

 

 

795

 

 

 

—

 

Mortgage/Agency-backed bonds

 

 

1,748

 

 

 

—

 

 

 

1,748

 

 

 

—

 

U.S. government bonds

 

 

3,685

 

 

 

3,685

 

 

 

—

 

 

 

—

 

Foreign government bonds

 

 

383

 

 

 

—

 

 

 

383

 

 

 

—

 

Marketable equity securities

 

 

 

 

 

 

 

 

 

 

 

 

Marketable equity securities – various industries

 

 

804

 

 

 

804

 

 

 

—

 

 

 

—

 

Deferred compensation plan assets

 

 

22,942

 

 

 

22,942

 

 

 

—

 

 

 

—

 

Total

 

$

33,227

 

 

$

27,659

 

 

$

5,568

 

 

$

—

 

 

The fair value of its Level 2 securities is calculated using a weighted average market price for each security. Market prices are obtained from a variety of industry standard data providers, large financial institutions and other third-party sources. These multiple market prices are used as inputs into a distribution-curve-based algorithm to determine the daily market value of each security.
v3.23.2
Inventory
 3 Months Ended
Mar. 31, 2023
Inventory Disclosure [Abstract]  
Inventory

7. INVENTORY

Inventory consisted of the following:

 

 

 

As of

 

 

As of

 

(In thousands)

 

March 31, 2023

 

 

December 31, 2022

 

Raw materials

 

$

167,086

 

 

$

186,346

 

Work in process

 

 

7,383

 

 

 

12,087

 

Finished goods

 

 

241,822

 

 

 

229,098

 

Total inventory, net

 

$

416,291

 

 

$

427,531

 

Inventory reserves are established for estimated excess and obsolete inventory equal to the difference between the cost of the inventory and the estimated net realizable value of the inventory based on estimated reserve percentages, which considers historical usage, known trends, inventory age and market conditions. As of March 31, 2023 and December 31, 2022, inventory reserves were $73.3 million and $57.0 million, respectively.
v3.23.2
Property, Plant and Equipment
 3 Months Ended
Mar. 31, 2023
Property, Plant and Equipment [Abstract]  
Property, Plant and Equipment

8. PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment consisted of the following:

 

 

 

As of

 

 

As of

 

(In thousands)

 

March 31, 2023

 

 

December 31, 2022

 

Engineering and other equipment

 

$

173,968

 

 

$

170,785

 

Building

 

 

83,287

 

 

 

82,932

 

Computer hardware and software

 

 

82,682

 

 

 

80,455

 

Building and land improvements

 

 

51,081

 

 

 

47,861

 

Furniture and fixtures

 

 

23,525

 

 

 

22,403

 

Land

 

 

5,367

 

 

 

5,364

 

     Total property, plant and equipment

 

 

419,910

 

 

 

409,800

 

Less: accumulated depreciation

 

 

(307,941

)

 

 

(299,101

)

     Total property, plant and equipment, net

 

$

111,969

 

 

$

110,699

 

Long-lived assets used in operations are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable and the undiscounted cash flows estimated to be generated by the asset are less than the asset’s carrying value. During the three months ended March 31, 2023 and 2022, no impairment charges were recognized.

Depreciation expense was $7.6 million and $2.8 million for the three months ended March 31, 2023 and 2022, respectively, which is recorded in cost of revenue, selling, general and administrative expenses and research and development expenses in the Condensed Consolidated Statements of Loss.
v3.23.2
Goodwill
 3 Months Ended
Mar. 31, 2023
Goodwill Disclosure [Abstract]  
Goodwill

9. GOODWILL

The changes in the carrying amount of goodwill for the three months ended March 31, 2023 are as follows:

 

(In thousands)

 

Network Solutions

 

 

Services & Support

 

 

Total

 

As of December 31, 2022

 

$

298,280

 

 

$

83,444

 

 

$

381,724

 

Foreign currency translation adjustments

 

 

3,139

 

 

 

892

 

 

 

4,031

 

As of March 31, 2023

 

$

301,419

 

 

$

84,336

 

 

$

385,755

 

 

Related to the Business Combination with ADVA the Company recognized $350.5 million of goodwill upon the merger on July 15, 2022. Goodwill represents the excess purchase price over the fair value of net assets acquired. We qualitatively assess the carrying value of goodwill each reporting period for events or circumstance changes that would more likely than not reduce the fair value of the reporting unit below its carrying amount. Based on its assessment of certain qualitative factors such as macro-economic conditions, industry and market considerations, costs factors and overall financial performance, management concluded that no such events or circumstance changes were identified that would suggest that the fair value of the goodwill was more likely than not greater than it's carrying amount as of March 31, 2023. No impairment of goodwill was recorded during the three months ended March 31, 2023 and 2022.
v3.23.2
Intangible Assets
 3 Months Ended
Mar. 31, 2023
Intangible Assets, Net (Excluding Goodwill) [Abstract]  
Intangible Assets

10. INTANGIBLE ASSETS

Intangible assets consisted of the following:

 

 

 

 

As of March 31, 2023

 

 

As of December 31, 2022

 

(In thousands)

Weighted Average Useful Life
(in years)

 

 

Gross Carrying Amount

 

 

Accumulated Amortization

 

 

Net Book Value

 

 

Gross Carrying Amount

 

 

Accumulated Amortization

 

 

Net Book Value

 

Customer relationships

 

10.9

 

 

$

54,103

 

 

$

(12,180

)

 

$

41,923

 

 

$

55,517

 

 

$

(12,772

)

 

$

42,745

 

Backlog

 

1.6

 

 

 

56,382

 

 

 

(35,348

)

 

 

21,034

 

 

 

55,782

 

 

 

(22,725

)

 

 

33,057

 

Developed technology

 

8.5

 

 

 

323,723

 

 

 

(31,604

)

 

 

292,119

 

 

 

320,364

 

 

 

(21,856

)

 

 

298,508

 

Licensed technology

 

9.0

 

 

 

5,900

 

 

 

(3,305

)

 

 

2,595

 

 

 

5,900

 

 

 

(3,141

)

 

 

2,759

 

Licensing agreements

 

8.5

 

 

 

560

 

 

 

(316

)

 

 

244

 

 

 

560

 

 

 

(298

)

 

 

262

 

Patents

 

7.3

 

 

 

500

 

 

 

(449

)

 

 

51

 

 

 

500

 

 

 

(431

)

 

 

69

 

Trade names

 

3.0

 

 

 

29,167

 

 

 

(7,847

)

 

 

21,320

 

 

 

29,066

 

 

 

(5,255

)

 

 

23,811

 

     Total

 

 

 

$

470,335

 

 

$

(91,049

)

 

$

379,286

 

 

$

467,689

 

 

$

(66,478

)

 

$

401,211

 

Intangible assets are reviewed for impairment whenever events and circumstances indicate impairment may have occurred. The Company assessed impairment triggers related to intangible assets during each financial period in 2023 and 2022. As a result, no quantitative impairment test of long-lived assets was performed as of March 31, 2023 and 2022, and no impairment losses of intangible assets were recorded during the three months ended March 31, 2023 and 2022.

Amortization expense was $25.8 million and $0.9 million in the three months ended March 31, 2023 and 2022, respectively, and was included in cost of revenue, selling, general and administrative expenses and research and development expenses in the Condensed Consolidated Statements of Loss.

Estimated future amortization expense of intangible assets was as follows:

 

 

 

As of

 

(In thousands)

 

March 31, 2023

 

2023

 

$

56,855

 

2024

 

 

58,129

 

2025

 

 

46,558

 

2026

 

 

43,292

 

2027

 

 

41,922

 

Thereafter

 

 

132,530

 

     Total

 

$

379,286

 
v3.23.2
Hedging
 3 Months Ended
Mar. 31, 2023
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Hedging

11. HEDGING

The Company has certain forward rate agreements to hedge foreign currency exposure of expected future cash flows in foreign currency. The Company does not hold or issue derivative instruments for trading or other speculative purposes. Derivatives are initially recognized at fair value on the date a derivative contract is entered into and are subsequently re-measured to their fair value at the end of each reporting period. All changes in the fair value of derivative instruments are recognized as other income (expense) in the Consolidated Statements of Income. The derivative instruments are not subject to master netting agreements and are not offset in the Consolidated Balance Sheets. We are exposed to risk from credit-related losses resulting from nonperformance by counterparties to our financial instruments. We perform credit evaluations of our counterparties under forward exchange contracts and expect all counterparties to meet their obligations. We have not experienced credit losses from our counterparties. As of March 31, 2023, the Company had 53 forward rate contracts outstanding.

Foreign Currency Hedging Agreement

On November 3, 2022, the Company entered into a Euro/U.S. forward contract arrangement (the “Initial Forward”) with Wells Fargo Bank, N.A. (the “Hedge Counterparty”). The Initial Forward, which is governed by the provisions of an ISDA Master Agreement (including schedules thereto and transaction confirmations that supplement such agreement) entered into between the Company and the Hedge Counterparty, enables the Company to convert a portion of its Euro denominated payment obligations under the DPLTA into U.S. Dollars. Under the Initial Forward, the Company agreed to exchange an aggregate notional amount of $160.0 million U.S. dollars for Euros at a daily fixed forward rate ranging from $0.98286 to $1.03290. The aggregate amount of $160.0 million is divided into eight quarterly tranches of $20.0 million, commencing in the fourth quarter of 2022. The Company, at its sole discretion, may exchange all or part of each tranche on any given day within the applicable quarter; provided, however, that it must exchange the full tranche by the end of such quarter. The Initial Forward may be accelerated or terminated early for a number of reasons, including but not limited to (i) non-payment by the Company or the Hedge Counterparty, (ii) breach of representation or warranty or covenant by either party or (iii) insolvency or bankruptcy of either party.

On March 21, 2023, the Company entered into a Euro/U.S. dollar forward contract arrangement (the “Forward”) with Wells Fargo Bank, N.A. (the “Hedge Counterparty”). Under the Forward, which is governed by the provisions of an ISDA Master Agreement (including schedules thereto and transaction confirmations that supplement such agreement) entered into between the Company and the Hedge Counterparty, the Company will exchange an aggregate notional amount of $160.0 million U.S. dollars for Euros at a daily fixed forward rate of $1.085 per €1.00 in average. During the three months ended March 31, 2023, the Company settled one $20.0 million forward contract tranche and the remaining will be divided into seven quarterly tranches of $20.0 million. These new forward contracts transacted on March 21, 2023 (to sell EUR/buy USD) were entered into for the purpose of unwinding the previously transacted forward contracts (to buy EUR/sell USD), transacted in November 2022. The drawdown dates of the original ratchet forwards are set to the same date as the maturity of the new offsetting forward contracts.

The fair values of the Company's derivative instruments recorded in the Condensed Consolidated Balance Sheet as of March 31, 2023 and December 31, 2022 were as follows:

 

(In thousands)

 

Balance Sheet Location

 

March 31, 2023

 

 

December 31, 2022

 

Derivatives Not Designated as Hedging Instruments (Level 2):

 

 

 

 

 

 

 

 

Foreign exchange contracts – derivative assets

 

Other receivables

 

$

11,831

 

 

$

11,992

 

Foreign exchange contracts – derivative liabilities

 

Accounts payable

 

$

(351

)

 

$

(633

)

Total derivatives

 

 

 

$

11,480

 

 

$

11,359

 

The change in the fair values of the Company's derivative instruments recorded in the Condensed Consolidated Statements of Income during the three months ended March 31, 2023 and 2022 were as follows:

 

 

 

 

 

Three Months Ended

 

 

 

 

 

March 31,

 

(In thousands)

 

Income Statement
Location

 

2023

 

 

2022

 

Derivatives Not Designated as Hedging Instruments:

 

 

 

 

 

 

 

 

Foreign exchange contracts

 

Other income (expense), net

 

$

(69

)

 

$

—

 
v3.23.2
Revolving Credit Agreements
 3 Months Ended
Mar. 31, 2023
Debt Disclosure [Abstract]  
Revolving Credit Agreements

12. REVOLVING CREDIT AGREEMENTS

The carrying amounts of the Company's current and non-current revolving credit agreements in its Condensed Consolidated Balance Sheets were as follows:

 

 

 

(As restated)

 

 

 

 

 

 

As of

 

 

As of

 

(In thousands)

 

March 31, 2023

 

 

December 31, 2022

 

New Nord/LB revolving line of credit

 

$

10,843

 

 

$

—

 

Nord/LB revolving line of credit

 

 

—

 

 

 

16,091

 

Syndicated credit agreement working capital line of credit

 

 

—

 

 

 

10,727

 

DZ bank revolving line of credit

 

 

—

 

 

 

9,118

 

Total current revolving credit agreements

 

$

10,843

 

 

$

35,936

 

 

 

 

(As restated)

 

 

 

 

 

 

As of

 

 

As of

 

(In thousands)

 

March 31, 2023

 

 

December 31, 2022

 

Wells Fargo credit agreement

 

$

180,000

 

 

$

60,000

 

Total non-current revolving credit agreement

 

$

180,000

 

 

$

60,000

 

As of March 31, 2023, the weighted average interest rate on our revolving credit agreements was 6.2%.

Wells Fargo Credit Agreement

On July 18, 2022, ADTRAN Holdings, Inc. and ADTRAN, Inc., as the borrower, entered into a credit agreement with a syndicate of banks, including Wells Fargo Bank, National Association, as administrative agent (“Administrative Agent”), and the other lenders named therein (the “Credit Agreement”). The Credit Agreement allowed for borrowings of up to $100 million in aggregate principal amount, but the borrowings increased to up to $400 million in aggregate principal amount upon the DPLTA becoming effective on January 16, 2023.

The Credit Agreement replaced the Cadence Revolving Credit Agreement and the Wells Fargo Revolving Credit Agreement. In connection with the entry into the Credit Agreement, all outstanding borrowings under such credit agreements have been repaid and the agreements terminated.

As of March 31, 2023, ADTRAN, Inc.’s borrowings under the revolving line of credit were $180.0 million. In addition, we may issue up to $25.0 million in letters of credit against our $400.0 million total facility. As of March 31, 2023, we had a total of $3.4 million in letters of credit under ADTRAN, Inc. outstanding against our eligible borrowings, leaving a net amount of $216.6 million available for future borrowings. Any future credit extensions under the Credit Agreement are subject to customary conditions precedent. The proceeds of any loans are expected to be used for general corporate purposes and to pay a portion of the Exchange Offer consideration. The Credit Agreement matures in July 2027 but provides the Company with an option to request extensions subject to customary conditions.

All U.S. borrowings under the Credit Agreement (other than swingline loans, which will bear interest at the Base Rate (as defined below)) will bear interest, at the Company’s option, at a rate per annum equal to (A)(i) the highest of (a) the federal funds rate (i.e., for any day, the rate per annum equal to the weighted average of the rates on overnight federal funds transactions with members of the Federal Reserve System, as published by the Federal Reserve Bank of New York on the business day next succeeding such day) plus ½ of 1%, (b) the prime commercial lending rate of the Administrative Agent, as established from time to time at its principal U.S. office (which such rate is an index or base rate and will not necessarily be its lowest or best rate charged to its customers or other banks), and (c) the daily Adjusted Term SOFR (as defined in the Credit Agreement) for a one-month tenor plus 1%, plus (ii) the applicable rate, ranging from 0.5% to 1.25% (the “Base Rate”), or (B) the sum of the Adjusted Term SOFR (as defined in the Credit Agreement) plus the applicable rate, ranging from 1.4% to 2.15%, provided that such sum is subject to a 0.0% floor (such loans utilizing this interest rate, “SOFR Loans”). All E.U. borrowings under the Credit Agreement (other than swingline loans) will bear interest at a rate per annum equal to the sum of the Euro Interbank Offered Rate as administered by the European Money Markets Institute (or a comparable or successor administrator approved by the Administrative Agent) plus the applicable rate, ranging from 1.5% to 2.25%, provided that such sum is subject to a 0.0% floor (such loans utilizing this interest rate, “EURIBOR Loans”). The applicable rate is based on the consolidated net leverage ratio of the Company and its subsidiaries as determined pursuant to the terms of the Credit Agreement. Default interest is 2.00% per annum in excess of the rate otherwise applicable in the case of any overdue principal or any other overdue amount.

In addition to paying interest on outstanding principal under the Credit Agreement, the Company is required to pay a commitment fee to the lenders under the Credit Agreement in respect of unutilized revolving loan commitments and an additional commitment ticking fee at a rate of 0.25% on the commitment amounts of each lender until the earliest of (i) the date of the Senior Credit Facilities Increase, (ii) the Company’s voluntary termination of the credit facility commitment, and (iii) December 31, 2023. The Company is also required

to pay a participation fee to the Administrative Agent for the account of each lender with respect to the Company’s participation in letters of credit at the then applicable rate for SOFR Loans.

The Credit Agreement permits the Company to prepay any or all of the outstanding loans or to reduce the commitments under the Credit Agreement without incurring premiums or penalties (except breakage costs with respect to SOFR Loans and EURIBOR Loans). The Credit Agreement contains customary affirmative and negative covenants, including incurrence covenants and certain other limitations on the ability of the Company and the Company’s subsidiaries to incur additional debt, guarantee other obligations, grant liens on assets, make investments, dispose of assets, pay dividends or other payments on capital stock, make restricted payments, engage in mergers or consolidations, engage in transactions with affiliates, modify its organizational documents, and enter into certain restrictive agreements. It also contains customary events of default (subject to customary cure periods and materiality thresholds). Furthermore, the Credit Agreement requires that the consolidated total net leverage ratio (as defined in the Credit Agreement) of the Company and its subsidiaries tested on the last day of each fiscal quarter not exceed 3.25 to 1.0 through September 30, 2024 and 2.75 to 1.00 from December 31, 2024 and thereafter, subject to certain exceptions. The Credit Agreement also requires that the consolidated interest coverage ratio (as defined in the Credit Agreement) of the Company and its subsidiaries tested on the last day of each fiscal quarter not fall below 3.00 to 1.00. As of March 31, 2023, the Company was in compliance with all material covenants.

Finally, pursuant to a Collateral Agreement, dated as of July 18, 2022, among the Company, ADTRAN, Inc. and the Administrative Agent, ADTRAN, Inc.’s obligations under the Credit Agreement are secured by substantially all of the assets of ADTRAN, Inc. and the Company. In addition, the Company has guaranteed ADTRAN, Inc.’s obligations under the Credit Agreement pursuant to a Guaranty Agreement, dated as of July 18, 2022, by ADTRAN, Inc. and the Company in favor of the Administrative Agent.

New Nord/LB Revolving Line of Credit

On March 29, 2023, ADVA entered into a $16.1 million unsecured revolving line of credit with Norddeutsche Landesbark - Girozentrale (Nord/LB) that bears interest of Euro Short Term Rate plus 1.94%. The line of credit has a perpetual term that can be terminated by the Company or Nord/LB at any time. As of March 31, 2023, ADVA borrowed $10.8 million under this facility.

Nord/LB Revolving Line of Credit

On August 8, 2022, ADVA entered into a $16.1 million revolving line of credit with Norddeutsche Landesbark - Girozentrale (Nord/LB) that bears interest of Euro Short Term Rate plus 1.4% and which matures in August 2023. On January 31, 2023, the Company repaid the outstanding borrowings under the Nord/LB revolving line of credit. No amounts are available for future borrowings.

Syndicated Credit Agreement Working Capital Line of Credit

In September 2018, ADVA entered into a syndicated credit agreement with Bayerische Landesbank and Deutsche Bank AG Branch German Business to borrow up to $10.7 million as part of a working capital line of credit. On January 31, 2023, the Company repaid the outstanding borrowings under the syndicated credit agreement working capital line of credit. No amounts are available for future borrowings.

DZ Bank Revolving Line of Credit

In the fourth quarter of 2022, ADVA entered into a revolving line of credit with DZ Bank to borrow up to $9.1 million. Interest on the line of credit reset monthly based on renewal of the loan and was 2.8% at the time the loan was repaid. On March 12, 2023, the Company repaid the outstanding borrowings under the DZ Bank revolving line of credit. No amounts are available for future borrowings.
v3.23.2
Notes Payable
 3 Months Ended
Mar. 31, 2023
Debt Disclosure [Abstract]  
Notes Payable

13. NOTES PAYABLE

The carrying amounts of the Company's notes payable in its Condensed Consolidated Balance Sheets were as follows:

 

 

 

Fair Value as of

 

 

Carrying Value as of

 

 

Carrying Value as of

 

(In thousands)

 

March 31, 2023

 

 

March 31, 2023

 

 

December 31, 2022

 

Syndicated credit agreement notes payable

 

$

—

 

 

$

—

 

 

$

24,598

 

Total Notes Payable

 

$

—

 

 

$

—

 

 

$

24,598

 

Syndicated Credit Agreement Note Payable

In September 2018, ADVA entered into a syndicated credit agreement with Bayerische Landesbank and Deutsche Bank AG Branch German Business to borrow $63.7 million. On January 31, 2023, the Company repaid the outstanding borrowings under the syndicated credit agreement note payable. No amounts are available for future borrowings.
v3.23.2
Employee Benefit Plans
 3 Months Ended
Mar. 31, 2023
Retirement Benefits [Abstract]  
Employee Benefit Plans

14. EMPLOYEE BENEFIT PLANS

We maintain a defined benefit pension plan covering employees in certain foreign countries.

In connection with the Business Combination, we acquired $29.6 million of additional obligations and $22.3 million of assets related to post-employment benefit plans for certain groups of employees at our new operations outside of the U.S. Plans vary depending on the legal, economic, and tax environments of the respective country. For defined benefit plans, accruals for pensions and similar commitments have been included in the results for this year. The new defined benefit plans are for employees in Switzerland, Italy, Israel and India:

•
In Switzerland, there are two defined benefit pension plans. Both plans provide benefits in the event of retirement, death or disability. The plan's benefits are based on age, years of service, salary and on a participants old age account. The plans are financed by contributions paid by the participants and by the Company.
•
In Italy, the post-employment benefit plan is required due to statutory provisions. The plan is financed directly by the Company on a pay as you go basis. Employees receive their pension payments as a function of salary, inflation and a notional account.
•
In Israel, there is a defined benefit pension plan that provides benefits in the event of a participant being dismissed involuntarily, retirement or death. The plan's benefits are based on the higher of the severance benefit required by law or the cash surrender value of the severance benefit component of any qualifying insurance policy or long-term employee benefit fund that is registered in the participants' name. The plan is financed by contributions paid by the Company.
•
In India, the post-employment benefit plan is required due to statutory provisions. The plan is financed directly by the Company on a pay as you go basis.

The Company's net pension liability totaled $10.7 million and $10.6 million as of March 31, 2023 and December 31, 2022, respectively.

The following table summarizes the components of net periodic pension cost related to a defined benefit pension plan covering employees in certain foreign countries:

 

 

 

Three Months Ended

 

 

 

March 31,

 

(In thousands)

 

2023

 

 

2022

 

Service cost

 

$

398

 

 

$

257

 

Interest cost

 

 

(32

)

 

 

222

 

Expected return on plan assets

 

 

58

 

 

 

(470

)

Amortization of actuarial losses

 

 

6

 

 

 

89

 

Net periodic pension cost

 

$

430

 

 

$

98

 

 

The components of net periodic pension cost, other than the service cost component, are included in other income, net in the Condensed Consolidated Statements of Loss. Service cost is included in cost of revenue, selling, general and administrative expenses and research and development expenses in the Condensed Consolidated Statements of Loss. The Company made contributions to the defined benefit pension plans totaling $1.0 million and $0.5 million during the three months ending March 31, 2023 and 2022, respectively. Contributions to the defined benefit pension plans for the remainder of 2023 will be limited to benefit payments to retirees which are paid out of the operating cash flows of the Company and are expected to be approximately $3.3 million.
v3.23.2
Equity
 3 Months Ended
Mar. 31, 2023
Equity [Abstract]  
Equity

15. EQUITY

Accumulated Other Comprehensive Income (Loss)

The following tables present the changes in accumulated other comprehensive income (loss), net of tax, by component:

 

 

Three Months Ended March 31, 2023

 

(In thousands)

 

Unrealized
(Losses) Gains
on
Available-
for-Sale
Securities

 

 

Defined
Benefit Plan
Adjustments

 

 

Foreign
Currency
Adjustments

 

 

ASU 2018-02 Adoption

 

 

Total

 

Balance as of December 31, 2022

 

$

(836

)

 

$

(1,016

)

 

$

48,180

 

 

$

385

 

 

$

46,713

 

Other comprehensive income before
   reclassifications

 

 

83

 

 

 

—

 

 

 

8,678

 

 

 

—

 

 

 

8,761

 

Amounts reclassified from accumulated other
   comprehensive (loss) income

 

 

(14

)

 

 

35

 

 

 

—

 

 

 

—

 

 

 

21

 

Net current period other comprehensive income

 

 

69

 

 

 

35

 

 

 

8,678

 

 

 

—

 

 

 

8,782

 

Less: Comprehensive income attributable to non-controlling interest, net of tax

 

 

—

 

 

 

—

 

 

 

244

 

 

 

—

 

 

 

244

 

Balance as of March 31, 2023

 

$

(767

)

 

$

(981

)

 

$

56,614

 

 

$

385

 

 

$

55,251

 

 

 

 

Three Months Ended March 31, 2022

 

(In thousands)

 

Unrealized
(Losses)
Gains
on
Available-
for-Sale
Securities

 

 

Defined
Benefit Plan
Adjustments

 

 

Foreign
Currency
Adjustments

 

 

ASU 2018-02 Adoption

 

 

Total

 

Balance as of December 31, 2021

 

$

(552

)

 

$

(5,613

)

 

$

(6,134

)

 

$

385

 

 

$

(11,914

)

Other comprehensive loss before
   reclassifications

 

 

(975

)

 

 

—

 

 

 

(905

)

 

 

—

 

 

 

(1,880

)

Amounts reclassified from accumulated other
   comprehensive income (loss)

 

 

251

 

 

 

(13

)

 

 

—

 

 

 

—

 

 

 

238

 

Net current period other comprehensive income (loss)

 

 

(724

)

 

 

(13

)

 

 

(905

)

 

 

—

 

 

 

(1,642

)

Balance as of March 31, 2022

 

$

(1,276

)

 

$

(5,626

)

 

$

(7,039

)

 

$

385

 

 

$

(13,556

)

 

 

The following tables present the details of reclassifications out of accumulated other comprehensive loss:

 

 

 

Three Months Ended March 31, 2023

(In thousands)

 

Amount
Reclassified
from
Accumulated
Other
Comprehensive
(Loss) Income

 

 

Affected Line Item in the
Statement Where Net
(Loss) Income Is Presented

Unrealized gain (loss) on available-for-sale securities:

 

 

 

 

 

Net realized gain on sales of securities

 

$

18

 

 

Net investment (loss) gain

Defined benefit plan adjustments – actuarial loss

 

 

(51

)

 

(1)

Total reclassifications for the period, before tax

 

 

(33

)

 

 

Tax benefit

 

 

12

 

 

 

Total reclassifications for the period, net of tax

 

$

(21

)

 

 

 

(1)
A part of the computation of net periodic pension cost, which is included in other income, net in the Condensed Consolidated Statements of Loss.

 

 

Three Months Ended March 31, 2022

(In thousands)

 

Amount
Reclassified
from
Accumulated
Other
Comprehensive
(Loss) Income

 

 

Affected Line Item in the
Statement Where Net
(Loss) Income Is Presented

Unrealized gain (loss) on available-for-sale securities:

 

 

 

 

 

Net realized loss on sales of securities

 

$

(330

)

 

Net investment (loss) gain

Defined benefit plan adjustments – actuarial gain

 

 

19

 

 

(1)

Total reclassifications for the period, before tax

 

 

(311

)

 

 

Tax benefit

 

 

73

 

 

 

Total reclassifications for the period, net of tax

 

$

(238

)

 

 
(1)
A part of the computation of net periodic pension cost, which is included in other income, net in the Condensed Consolidated Statements of Loss.

 

The following table presents the tax effects related to the change in each component of other comprehensive income (loss):

 

 

Three Months Ended

 

 

Three Months Ended

 

 

 

March 31, 2023

 

 

March 31, 2022

 

(In thousands)

 

Before-Tax
Amount

 

 

Tax
(Expense)
Benefit

 

 

Net-of-Tax
Amount

 

 

Before-Tax
Amount

 

 

Tax
(Expense)
Benefit

 

 

Net-of-Tax
Amount

 

Unrealized gain (loss) on available-for-sale
   securities

 

$

109

 

 

$

(26

)

 

$

83

 

 

$

(1,283

)

 

$

308

 

 

$

(975

)

Reclassification adjustment for amounts related to
   available-for-sale investments included in net (loss) gain

 

 

(18

)

 

 

4

 

 

 

(14

)

 

 

330

 

 

 

(79

)

 

 

251

 

Reclassification adjustment for amounts related to
   defined benefit plan adjustments included in net (loss) gain

 

 

51

 

 

 

(16

)

 

 

35

 

 

 

(19

)

 

 

6

 

 

 

(13

)

Foreign currency translation adjustments

 

 

8,678

 

 

 

—

 

 

 

8,678

 

 

 

(905

)

 

 

—

 

 

 

(905

)

Total Other Comprehensive Income (Loss)

 

$

8,820

 

 

$

(38

)

 

$

8,782

 

 

$

(1,877

)

 

$

235

 

 

$

(1,642

)
v3.23.2
Redeemable Non-controlling Interest
 3 Months Ended
Mar. 31, 2023
Redeemable Noncontrolling Interest, Equity, Carrying Amount [Abstract]  
Redeemable Non-controlling Interest

16. REDEEMABLE NON-CONTROLLING INTEREST

The following table summarizes the redeemable non-controlling interest activity for the three months ended March 31, 2023:

 

 

 

Three Months Ended

 

(In thousands)

 

March 31, 2023

 

Balance at beginning of period

 

$

—

 

Reclassification of non-controlling interests

 

 

443,757

 

Redemption of redeemable non-controlling interest

 

 

(1,519

)

Net income attributable to redeemable non-controlling interests

 

 

2,809

 

Annual recurring compensation earned

 

 

(2,809

)

Translation adjustment

 

 

430

 

Balance as of March 31, 2023

 

$

442,668

 

Annual Recurring Compensation payable on untendered outstanding shares under the DPLTA must be recognized as it accrues. For the three months ended March 31, 2023, we have recognized $2.8 million representing the current quarter's portion of the annual dividend to the redeemable non-controlling shareholders, which will be paid annually after the ordinary general shareholders' meeting of ADVA beginning in 2024.
v3.23.2
Loss Per Share
 3 Months Ended
Mar. 31, 2023
Earnings Per Share [Abstract]  
Loss Per Share

17. LOSS PER SHARE

The calculation of basic and diluted loss per share is as follows:

 

 

 

Three Months Ended

 

 

 

March 31,

 

(In thousands, except per share amounts)

 

2023

 

 

2022

 

Numerator

 

 

 

 

 

 

Net loss attributable to ADTRAN Holdings, Inc.

 

$

(34,464

)

 

$

(1,127

)

Denominator

 

 

 

 

 

 

Weighted average number of shares – basic

 

 

78,358

 

 

 

49,113

 

Effect of dilutive securities

 

 

 

 

 

 

Stock options

 

 

—

 

 

 

—

 

PSUs, RSUs and restricted stock

 

 

—

 

 

 

—

 

Weighted average number of shares – diluted

 

 

78,358

 

 

 

49,113

 

Loss per share attributable to ADTRAN Holdings, Inc. – basic

 

$

(0.44

)

 

$

(0.02

)

Loss per share attributable to ADTRAN Holdings, Inc. – diluted

 

$

(0.44

)

 

$

(0.02

)

For the three months ended March 31, 2023 and 2022, 0.1 million and five thousand shares, respectively, of unvested PSUs, RSUs and restricted stock were excluded from the calculation of diluted earnings per share due to their anti-dilutive effect.

For the three months ended March 31, 2023 and 2022, 0.4 million and 0.1 million stock options, respectively, were outstanding but were not included in the computation of diluted earnings per share. These stock options were excluded because their exercise prices were greater than the average market price of the common shares during the applicable period, making them anti-dilutive under the treasury stock method.
v3.23.2
Segment Information
 3 Months Ended
Mar. 31, 2023
Segment Reporting [Abstract]  
Segment Information

18. SEGMENT INFORMATION

The chief operating decision maker regularly reviews the Company’s financial performance based on two reportable segments: (1) Network Solutions and (2) Services & Support.

The Network Solutions segment includes hardware and software products that enable a digital future which support the Company's Subscriber, Access and Aggregation, and Optical Networking Solutions. The Company's cloud-managed Wi-Fi gateways, virtualization software, and switches provide a mix of wired and wireless connectivity at the customer premises. In addition, its Carrier Ethernet products support a variety of applications at the network edge ranging from mobile backhaul to connecting enterprise customers (“Subscriber Solutions"). The Company's portfolio includes products for multi-gigabit service delivery over fiber or alternative media to homes and businesses.

The Services & Support segment offers a comprehensive portfolio of network design, implementation, maintenance and cloud-hosted services supporting its Subscriber, Access and Aggregation, and Optical Networking Solutions. These services assist operators in the deployment of multi-vendor networks while reducing their cost to maintain these networks. The cloud-hosted services include a suite of SaaS applications under the Company's Mosaic One platform that manages end-to-end network and service optimization for both fiber access infrastructure and mesh Wi-Fi connectivity. The Company backs these services with a global support organization that offers on-site and off-site support services with varying SLAs.

The performance of these segments is evaluated based on revenue, gross profit and gross margin; therefore, selling, general and administrative expenses, research and development expenses, interest and dividend income, interest expense, net investment (loss) gain, other income (loss), net and income tax benefit (expense) are reported on a Company-wide basis only. There is no inter-segment revenue. Asset information by reportable segment is not produced and, therefore, is not reported.

The following table presents information about the revenue and gross profit of its reportable segments:

 

 

Three Months Ended

 

 

 

March 31, 2023

 

 

March 31, 2022

 

(In thousands)

 

Revenue

 

 

Gross Profit

 

 

Revenue

 

 

Gross Profit

 

Network Solutions

 

$

282,418

 

 

$

63,288

 

 

$

138,374

 

 

$

47,721

 

Services & Support

 

 

41,494

 

 

 

24,520

 

 

 

16,144

 

 

 

6,595

 

Total

 

$

323,912

 

 

$

87,808

 

 

$

154,518

 

 

$

54,316

 

 

For the three months ended March 31, 2023 and 2022, $1.5 million and $0.2 million, respectively, of depreciation expense was included in gross profit for our Network Solutions segment. For the three months ended March 31, 2023 and 2022, $2 thousand and $3 thousand, respectively, of depreciation expense was included in gross profit for our Services & Support segment.

Revenue by Category

In addition to its reportable segments, revenue is also reported for the following three categories – Subscriber Solutions, Access & Aggregation Solutions, and Optical Networking Solutions.

Prior to the Business Combination with ADVA on July 15, 2022, ADTRAN reported revenue across the following three categories: (1) Access & Aggregation, (2) Subscriber Solutions & Experience and (3) Traditional & Other Products. Following the Business Combination with ADVA, the Company has recast these revenues such that ADTRAN’s former Access & Aggregation revenue is combined with a portion of the applicable ADVA solutions to create Access & Aggregation Solutions, ADTRAN’s former Subscriber Solutions & Experience revenue is combined with a portion of the applicable ADVA solutions to create Subscriber Solutions, and the revenue from Traditional & Other products is now included in the applicable Access & Aggregation Solutions or Subscriber Solutions category. Optical Networking Solutions is a new revenue category added to represent a meaningful portion of ADVA’s portfolio.

Our Subscriber Solutions portfolio is used by Service Providers to terminate their access services infrastructure at the customer premises while providing an immersive and interactive experience for residential, business and wholesale subscribers. This revenue category includes hardware- and software-based products and services. These solutions include fiber termination solutions for residential, business and wholesale subscribers, Wi-Fi access solutions for residential and business subscribers, Ethernet switching and network edge virtualization solutions for business subscribers, and cloud software solutions covering a mix of subscriber types.

Our Access & Aggregation Solutions are solutions that are used by communications Service Providers to connect residential subscribers, business subscribers and mobile radio networks to the Service Providers’ metro network, primarily through fiber-based connectivity. This revenue category includes hardware- and software-based products and services. Our solutions within this category are a mix of fiber access and aggregation platforms, precision network synchronization and timing solutions, and access orchestration solutions that ensure highly reliable and efficient network performance.

Our Optical Networking Solutions are used by communications Service Providers, internet content providers and large-scale enterprises to securely interconnect metro and regional networks over fiber. This revenue category includes hardware- and software-based products and services. Our solutions within this category include open optical terminals, open line systems, optical subsystems and modules, network infrastructure assurance systems, and automation platforms that are used to build high-scale, secure and assured optical networks.

The table below presents revenue information by category. Prior year amounts presented below have been reclassified to conform to the current period revenue category presentation:

 

 

Three Months Ended

 

 

 

March 31,

 

(In thousands)

 

2023

 

 

2022

 

Subscriber Solutions

 

$

79,336

 

 

$

56,722

 

Access & Aggregation Solutions

 

 

96,820

 

 

 

97,796

 

Optical Networking Solutions

 

 

147,756

 

 

 

—

 

Total

 

$

323,912

 

 

$

154,518

 

 

Revenue by Geographic Area

 

The following table presents revenue information by geographic area:

 

 

 

Three Months Ended

 

 

 

March 31,

 

(In thousands)

 

2023

 

 

2022

 

United States

 

$

131,466

 

 

$

99,048

 

Germany

 

 

76,286

 

 

 

10,920

 

United Kingdom

 

 

57,397

 

 

 

30,388

 

Other international

 

 

58,763

 

 

 

14,162

 

Total

 

$

323,912

 

 

$

154,518

 
v3.23.2
Liability for Warranty Returns
 3 Months Ended
Mar. 31, 2023
Product Warranties Disclosures [Abstract]  
Liability for Warranty Returns

19. LIABILITY FOR WARRANTY RETURNS

The Company's products generally include warranties of 90 days to five years for product defects. The Company accrues for warranty returns at the time of product shipment based on its historical return rate and estimate of the cost to repair or replace the defective products. The Company engages in extensive product quality programs and processes, including actively monitoring and evaluating the quality of its component suppliers. The increasing complexity of the Company's products may cause warranty incidences, when they arise, to be more costly. Estimates regarding future warranty obligations may change due to product failure rates, material usage and other rework costs incurred in correcting a product failure. In addition, from time to time, specific warranty accruals may be recorded if unforeseen problems arise. Should the Company's actual experience relative to these factors be worse than its estimates, the Company will be required to record additional warranty expense. The liability for warranty obligations totaled $7.2 million and $7.2 million as of March 31, 2023 and December 31, 2022, respectively, and is included in accrued expenses and other liabilities in the Condensed Consolidated Balance Sheets. The warranty expense and write-off activity for the three months ended March 31, 2023 and 2022 are summarized as follows:

 

 

 

Three Months Ended

 

 

 

March 31,

 

(In thousands)

 

2023

 

 

2022

 

Balance at beginning of period

 

$

7,196

 

 

$

5,403

 

Plus: Amounts charged to cost and expenses

 

 

1,077

 

 

 

344

 

Plus: Foreign currency translation adjustments

 

 

26

 

 

 

—

 

Less: Deductions

 

 

(1,099

)

 

 

(604

)

Balance at end of period

 

$

7,200

 

 

$

5,143

 
v3.23.2
Commitments and Contingencies
 3 Months Ended
Mar. 31, 2023
Commitments and Contingencies Disclosure [Abstract]  
Commitments and Contingencies

20. COMMITMENTS AND CONTINGENCIES

Legal Matters

From time to time the Company is subject to or otherwise involved in various lawsuits, claims, investigations and legal proceedings that arise out of or are incidental to the conduct of our business (collectively, “Legal Matters”), including those relating to employment matters, patent rights, regulatory compliance matters, stockholder claims, and contractual and other commercial disputes. Such Legal Matters, even if not meritorious, could result in the expenditure of significant financial and managerial resources. Additionally, an unfavorable outcome in a legal matter, including in a patent dispute, could require the Company to pay damages, entitle claimants to other relief, such as royalties, or could prevent the Company from selling some of its products in certain jurisdictions. At this time, the Company is unable to predict the outcome of or estimate the possible loss or range of loss, if any, associated with such legal matters.

DPLTA Exit Costs

Pursuant to the terms of the DPLTA, each ADVA shareholder (other than the Company) has received an offer to elect either (1) to remain an ADVA shareholder and receive from us an Annual Recurring Compensation payment, or (2) to receive Exit Compensation. Assuming all of the minority holders of currently outstanding ADVA shares were to elect the second option, we are obligated to make aggregate Exit Compensation payments of approximately EUR 309.5 million or approximately $335.6 million, based on an exchange rate as of March 31, 2023. Shareholders electing the first option of Annual Recurring Compensation may later elect the second option. The opportunity for outside ADVA shareholders to tender ADVA shares in exchange for Exit Compensation had been scheduled to expire on March 16, 2023. However, due to the appraisal proceedings that have been initiated in accordance with applicable German law, this time period for tendering shares has been extended pursuant to the German Stock Corporation Act (Aktiengesetz) and will end two months after the date on which a final decision in such appraisal proceedings has been published in the Federal Gazette (Bundesanzeiger).

Our obligation to pay Annual Recurring Compensation under the DPLTA is a continuing payment obligation, which will amount to approximately EUR 10.5 million or $11.3 million (based on the current exchange rate) per year assuming none of the minority ADVA shareholders were to elect Exit Compensation. The foregoing amounts do not reflect any potential increase in payment obligations that we may have depending on the outcome of ongoing appraisal proceedings in Germany. During the three months ended March 31, 2023, we accrued $2.8 million in Annual Recurring Compensation, which was reflected as a reduction to retained earnings.

Performance Bonds

Certain contracts, customers and jurisdictions in which we do business require us to provide various guarantees of performance such as bid bonds, performance bonds and customs bonds. As of March 31, 2023 and December 31, 2022, we had commitments related to these bonds totaling $11.7 million and $22.0 million, respectively, which expire at various dates through April 2031. In general, we would only be liable for the amount of these guarantees in the event of default under each contract, the probability of which we believe is remote.

Purchase Commitments

The Company purchases components from a variety of suppliers and use contract manufacturers to provide manufacturing services for our products. Our inventory purchase commitments are for short-term product manufacturing requirements as well as for commitments to suppliers to secure manufacturing capacity. Certain of our inventory purchase commitments with contract manufacturers and suppliers relate to arrangements to secure supply and pricing for certain product components for multi-year periods. As of March 31, 2023, purchase commitments totaled $459.3 million.
v3.23.2
Restructuring
 3 Months Ended
Mar. 31, 2023
Restructuring and Related Activities [Abstract]  
Restructuring

21. RESTRUCTURING

During the fourth quarter of 2022, the Company initiated a restructuring program designed to optimize the assets and business processes, and information technology systems of the Company in relation to the Business Combination with ADVA. The restructuring program is expected to maximize cost synergies by realizing operation scale, combining sales channels, streamlining corporate and general and administrative functions, including human capital resources and combining sourcing and production costs.

In February 2019, the Company announced the restructuring of a certain portion of its workforce predominantly in Germany, which included the closure of the Company’s office location in Munich, Germany accompanied by relocation or severance benefits for the affected employees. Voluntary early retirement was offered to certain other employees and was announced in March 2019 and again in August 2020. This plan was completed in 2021 and all amounts were paid in 2022.

A reconciliation of the beginning and ending restructuring liability, which is included in accrued wages and benefits in the Condensed Consolidated Balance Sheets as of March 31, 2023 and December 31, 2022, is as follows:

 

 

 

Three Months Ended

 

(In thousands)

 

March 31, 2023

 

Balance at beginning of period

 

$

159

 

Plus: Amounts charged to cost and expense

 

 

2,437

 

Less: Amounts paid

 

 

(1,574

)

Balance as of March 31, 2023

 

$

1,022

 

 

 

 

For the Year Ended

 

(In thousands)

 

December 31, 2022

 

Balance as of December 31, 2021

 

$

1,514

 

Plus: Amounts charged to cost and expense

 

 

1,629

 

Less: Amounts paid

 

 

(2,984

)

Balance as of December 31, 2022

 

$

159

 

Restructuring expenses included in the Condensed Consolidated Statements of (Loss) Income are for the three months ended March 31, 2023 and 2022:

 

 

 

Three Months Ended

 

 

 

March 31,

 

(In thousands)

 

2023

 

 

2022

 

 

 

 

 

 

 

 

   Network Solutions - Cost of revenue

 

$

58

 

 

$

—

 

   Services & Support - Cost of revenue

 

 

18

 

 

 

—

 

Cost of revenue

 

$

76

 

 

$

—

 

Selling, general and administrative expenses (1)

 

 

2,180

 

 

 

2

 

Research and development expenses (1)

 

 

181

 

 

 

—

 

Total restructuring expenses

 

$

2,437

 

 

$

2

 

 

 

The following table represents the components of restructuring expense by geographic area for the three months ended March 31, 2023 and 2022:

 

 

 

Three Months Ended

 

 

 

March 31,

 

(In thousands)

 

2023

 

 

2022

 

United States

 

$

1,119

 

 

$

2

 

International

 

 

1,318

 

 

 

—

 

Total restructuring expenses

 

$

2,437

 

 

$

2

 
v3.23.2
Subsequent Events
 3 Months Ended
Mar. 31, 2023
Subsequent Events [Abstract]  
Subsequent Events

22. SUBSEQUENT EVENTS

Dividend Approval

On May 8, 2023, the Company announced that its Board of Directors declared a quarterly cash dividend of $0.09 per common share to be paid to the Company’s stockholders of record as of the close of business on May 23, 2023. The payment date will be June 6, 2023 in the aggregate amount of approximately $7.1 million.

Appointment of Ulrich Dopfer as Principal Accounting Officer

As previously disclosed on the Company’s Form 8-K filed on March 30, 2023, Michael Foliano, formerly Senior Vice President of Finance and Chief Financial Officer of the Company, notified the Company of his intent to retire, effective June 28, 2023. Mr. Foliano served in his role as Chief Financial Officer of the Company through April 30, 2023. In connection with his transition, the Board of Directors appointed Ulrich Dopfer as Senior Vice President and Chief Financial Officer of the Company, effective May 1, 2023; however, Mr. Foliano continued to serve as the Company’s “principal accounting officer” within the meaning of the rules of the SEC under the Exchange Act (the “Principal Accounting Officer”), and as the Company’s Treasurer and Secretary. On May 10, 2023, the Board of Directors removed Mr. Foliano from such roles, designated Mr. Dopfer as the Company’s Principal Accounting Officer, and elected Mr. Dopfer as Treasurer and Secretary of the Company, effective as of such date.

ADVA Legal Matter

On May 8, 2023, ADVA and its U.S. subsidiary, ADVA Optical Networking North America Inc., filed a lawsuit in the U.S District Court for the Eastern District of Texas against Huawei Technologies Co. Ltd (“Huawei”) seeking a declaration from the court that Huawei violated contractual commitments to negotiate in good faith and to license patents, to the extent any patents are practiced by ADVA, on Fair, Reasonable and Non-Discriminatory (“FRAND”) terms and conditions. The case also seeks to obtain a ruling by the court that ADVA has complied with its own commitments and requests that the Court establish FRAND terms and conditions for obtaining a FRAND license on any standard essential patents that ADVA does in fact practice. The lawsuit also seeks to enjoin Huawei from enforcing certain of its patents against ADVA and its affiliates in other jurisdictions, and includes allegations by ADVA that it does not infringe five Huawei patents and that Huawei has infringed an ADVA patent. Huawei has not yet filed an answer in this matter. Given the current status of this matter, the Company is unable predict the outcome of or estimate the possible loss or range of loss, if any, associated with such legal matters.
v3.23.2
Summary of Significant Accounting Policies (Policies)
 3 Months Ended
Mar. 31, 2023
Accounting Policies [Abstract]  
Basis of Presentation

Basis of Presentation

The accompanying unaudited Condensed Consolidated Financial Statements of ADTRAN Holdings, Inc. and its subsidiaries have been prepared pursuant to the rules and regulations of the SEC applicable to interim financial information presented in Quarterly Reports on Form 10-Q. Accordingly, certain information and notes required by generally accepted accounting principles in the United States of America (“U.S. GAAP”) for complete financial statements are not included herein. The December 31, 2022 Condensed Consolidated Balance Sheet is derived from audited financial statements but does not include all disclosures required by U.S. GAAP.

In the opinion of management, all adjustments necessary to fairly state these interim statements have been recorded and are of a normal and recurring nature. The results of operations for an interim period are not necessarily indicative of the results for the full year. The interim financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in ADTRAN Holdings, Inc. Annual Report on Form 10-K/A for the year ended December 31, 2022, filed with the SEC on August 14, 2023.
Use of Estimates

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expense during the reporting period. Significant estimates include allowance for credit losses on accounts receivable and contract assets, excess and obsolete inventory reserves, warranty reserves, customer rebates, determination and accrual of the deferred revenue related to performance obligations under contracts with customers, estimated costs to complete obligations associated with deferred and accrued revenues and network installations, estimated income tax provision and income tax contingencies, fair value of stock-based compensation, assessment of goodwill and other intangibles for impairment, estimated lives of intangible assets, estimates of intangible assets upon measurement, estimated pension liability and fair value of investments. Actual amounts could differ significantly from these estimates.

We assessed certain accounting matters that generally require consideration of forecasted financial information in context with the information reasonably available to us and the unknown future impacts of supply chain constraints, inflationary pressures, the energy crisis, currency fluctuations and political tensions as of March 31, 2023 and through the date of this report. The accounting matters assessed included, but were not limited to, the allowance for credit losses, stock-based compensation, carrying value of goodwill, intangibles and other long-lived assets, financial assets, valuation allowances for tax assets, revenue recognition and costs of revenue. Future conditions related to supply chain constraints, inflationary pressures, the energy crisis, rising interest rates, instability in the financial services industry, currency fluctuations and political tensions could result in further impacts to the Company's consolidated financial statements in future reporting periods
Revision Of Previously Issued Financial Statements of Previously Issued Financial Statements

During the second quarter of 2023, the Company determined that it overstated total current liabilities and understated non-current liabilities as of March 31, 2023 and December 31, 2022, due to a revolving credit agreement being classified as a current liability instead of a non-current liability. The total amount of liabilities remains unchanged. The Company restated the March 31, 2023 Condensed Consolidated Balance Sheet presented in this report by decreasing current revolving credit agreements outstanding by $180.0 million and increasing non-current revolving credit agreement outstanding by $180.0 million.

The following table reflects the impact of the restatement to the specific line items presented in the Company’s previously reported condensed consolidated financial statements as of March 31, 2023:

 

(In thousands)

 

As Reported

 

 

Adjustment

 

 

As Restated

 

Revolving credit agreements outstanding

 

$

190,843

 

 

$

(180,000

)

 

$

10,843

 

Total current liabilities

 

$

522,204

 

 

$

(180,000

)

 

$

342,204

 

Non-current revolving credit agreement outstanding

 

$

—

 

 

$

180,000

 

 

$

180,000

 

 

The accompanying applicable Notes have been updated to reflect the effects of the restatement as of March 31, 2023.

 

 

Redeemable Non-Controlling Interest

As of March 31, 2023 and December 31, 2022, the ADVA stockholders’ equity ownership percentage in ADVA was approximately 34.6% and 34.7%, respectively.

As a result of the effectiveness of the DPLTA on January 16, 2023, the ADVA shares, representing the equity interest in ADVA held by holders other than the Company, can be tendered at any time and are, therefore, redeemable and must be classified outside stockholders’ equity. Therefore, the permanent equity noncontrolling interest balance was reclassified to redeemable non-controlling interest ("RNCI") on January 16, 2023 and was remeasured to fair value based on the trading market price of the ADVA shares.

Subsequently, the carrying value of the RNCI is adjusted to its maximum redemption value at each reporting date when the maximum redemption value is greater than the initial carrying amount of the redeemable noncontrolling interest. However, the RNCI will be remeasured using the current exchange rate at each reporting date as long as the RNCI is currently redeemable. For the period of time that the DPLTA is in effect, the RNCI will continue to be presented as redeemable non-controlling interest outside of stockholders’ equity in the condensed consolidated balance sheets.

See Note 16 for additional information on RNCI.

Recently Adopted Accounting Pronouncements

In October 2021, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update ("ASU") 2021-08, Business Combinations (Topic 805) Accounting for Contract Assets and Contract Liabilities from Contracts with Customers, which would require an acquirer to recognize and measure acquired contract assets and contract liabilities in a manner consistent with how the acquiree recognized and measured them in its pre-acquisition financial statements in accordance with Topic 606, Revenue Recognition. The Company early adopted ASU 2021-08 on July 1, 2022 and the standard was applied retrospectively beginning with January 1, 2022.

Recent Accounting Pronouncements Not Yet Adopted

There are currently no accounting pronouncements not yet adopted that are expected to have a material effect on the Condensed Consolidated Financial Statements.
Redeemable Non-Controlling Interest

Redeemable Non-Controlling Interest

As of March 31, 2023 and December 31, 2022, the ADVA stockholders’ equity ownership percentage in ADVA was approximately 34.6% and 34.7%, respectively.

As a result of the effectiveness of the DPLTA on January 16, 2023, the ADVA shares, representing the equity interest in ADVA held by holders other than the Company, can be tendered at any time and are, therefore, redeemable and must be classified outside stockholders’ equity. Therefore, the permanent equity noncontrolling interest balance was reclassified to redeemable non-controlling interest ("RNCI") on January 16, 2023 and was remeasured to fair value based on the trading market price of the ADVA shares.

Subsequently, the carrying value of the RNCI is adjusted to its maximum redemption value at each reporting date when the maximum redemption value is greater than the initial carrying amount of the redeemable noncontrolling interest. However, the RNCI will be remeasured using the current exchange rate at each reporting date as long as the RNCI is currently redeemable. For the period of time that the DPLTA is in effect, the RNCI will continue to be presented as redeemable non-controlling interest outside of stockholders’ equity in the condensed consolidated balance sheets.

See Note 16 for additional information on RNCI.
Recently Adopted Accounting Pronouncements

Recently Adopted Accounting Pronouncements

In October 2021, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update ("ASU") 2021-08, Business Combinations (Topic 805) Accounting for Contract Assets and Contract Liabilities from Contracts with Customers, which would require an acquirer to recognize and measure acquired contract assets and contract liabilities in a manner consistent with how the acquiree recognized and measured them in its pre-acquisition financial statements in accordance with Topic 606, Revenue Recognition. The Company early adopted ASU 2021-08 on July 1, 2022 and the standard was applied retrospectively beginning with January 1, 2022.
Recent Accounting Pronouncements Not Yet Adopted

Recent Accounting Pronouncements Not Yet Adopted

There are currently no accounting pronouncements not yet adopted that are expected to have a material effect on the Condensed Consolidated Financial Statements.
v3.23.2
Summary of significant accounting policies (Tables)
 3 Months Ended
Mar. 31, 2023
Accounting Policies [Abstract]  
Summary of Impact of Revision to Specific Line Items in Consolidated Financial Statements

The following table reflects the impact of the restatement to the specific line items presented in the Company’s previously reported condensed consolidated financial statements as of March 31, 2023:

 

(In thousands)

 

As Reported

 

 

Adjustment

 

 

As Restated

 

Revolving credit agreements outstanding

 

$

190,843

 

 

$

(180,000

)

 

$

10,843

 

Total current liabilities

 

$

522,204

 

 

$

(180,000

)

 

$

342,204

 

Non-current revolving credit agreement outstanding

 

$

—

 

 

$

180,000

 

 

$

180,000

 

 

The accompanying applicable Notes have been updated to reflect the effects of the restatement as of March 31, 2023.
v3.23.2
Business Combination (Tables)
 3 Months Ended
Mar. 31, 2023
Business Combinations [Abstract]  
Summary of Purchase Price for Business Combination

The following table summarizes the purchase price for the ADVA business combination:

 

(In thousands, except shares, share price and exchange ratio)

 

Purchase Price

 

ADVA shares exchanged

 

 

33,957,538

 

Exchange ratio

 

 

0.8244

 

ADTRAN Holdings, Inc. shares issued

 

 

27,994,595

 

ADTRAN Holdings, Inc. share price on July 15, 2022

 

$

20.20

 

Purchase price paid for ADVA shares

 

$

565,491

 

Equity compensation (1)

 

$

12,769

 

Total purchase price

 

$

578,260

 

(1) Represents the portion of replacement share-based payment awards that relates to pre-combination vesting.
Summary of Purchase Price Allocation of Assets Acquired and Liabilities Assumed

The following table summarizes the purchase price allocation for each major class of assets acquired and liabilities assumed in the acquisition of ADVA (in thousands):

 

(In thousands)

 

 

 

Total purchase price

 

$

578,260

 

Non-controlling interest

 

$

316,415

 

Net Assets:

 

 

 

Cash and cash equivalents

 

$

44,003

 

Accounts receivable

 

 

114,659

 

Other receivables

 

 

1,457

 

Inventory

 

 

200,331

 

Prepaid expenses and other current assets

 

 

28,208

 

Property plant and equipment

 

 

55,480

 

Deferred tax assets

 

 

1,759

 

Intangibles

 

 

403,780

 

Other non-current assets

 

 

31,074

 

Accounts payable

 

 

(98,587

)

Current unearned revenue

 

 

(26,047

)

Accrued expenses and other liabilities

 

 

(59,600

)

Current portion of notes payable

 

 

(25,254

)

Income tax payable, net

 

 

(4,898

)

Tax liabilities

 

 

(1,400

)

Non-current unearned revenue

 

 

(11,498

)

Pension liability

 

 

(6,820

)

Other non-current liabilities

 

 

(6,094

)

Non-current portion of revolving credit agreements and notes payable

 

 

(15,250

)

Non-current lease obligations

 

 

(20,046

)

Deferred tax liabilities

 

 

(61,040

)

Total net assets acquired

 

$

544,217

 

Goodwill

 

$

350,458

 
Summary of Fair Value of Intangible Assets Acquired

The fair value of the identifiable intangible assets acquired as of the acquisition date:

 

(In thousands)

Estimated-average useful life (in years) (1)

 

 

Fair value

 

 

Income Statement Amortization Classification

Developed technology

 

8.5

 

 

$

291,925

 

 

 Cost of revenue - Network Solutions

Backlog

 

1.4

 

 

 

52,165

 

 

 Cost of revenue - Network Solutions and Services & Support

Customer relationships

 

10.5

 

 

 

32,704

 

 

 Selling, general and administrative expenses

Trade name

 

2.8

 

 

 

26,986

 

 

 Selling, general and administrative expenses

Total

 

 

 

$

403,780

 

 

 

 

(1) Determination of the weighted average period of the individual categories of intangible assets was based on the nature of the applicable intangible asset and the expected future cash flows to be derived from the intangible asset. Amortization of intangible assets with definite lives is recognized over the period of time the assets are expected to contribute to future cash flows.
Summary of Unaudited Pro Forma Financial Information The unaudited pro forma information also does not include any integration costs that the Company may incur related to the acquisition as part of combining the operations of the companies.

 

 

Three Months Ended

 

(In thousands)

March 31, 2022

 

 

 

 

Revenue

$

345,844

 

Net loss

$

(73,489

)
v3.23.2
Revenue (Tables)
 3 Months Ended
Mar. 31, 2023
Revenue from Contract with Customer [Abstract]  
Disaggregate of Revenue by Reportable Segment and Revenue Category

The following table disaggregates revenue by reportable segment and revenue category. Prior year amounts presented below have been reclassified to conform to the current period revenue category presentation:

 

 

 

Three Months Ended

 

 

 

March 31, 2023

 

 

March 31, 2022

 

(In thousands)

 

Network Solutions

 

 

Services & Support

 

 

Total

 

 

Network Solutions

 

 

Services & Support

 

 

Total

 

Subscriber Solutions

 

$

70,287

 

 

$

9,049

 

 

$

79,336

 

 

$

52,390

 

 

$

4,332

 

 

$

56,722

 

Access & Aggregation Solutions

 

 

84,554

 

 

 

12,266

 

 

 

96,820

 

 

 

85,984

 

 

 

11,812

 

 

 

97,796

 

Optical Networking Solutions

 

 

127,577

 

 

 

20,179

 

 

 

147,756

 

 

 

—

 

 

 

—

 

 

 

—

 

Total

 

$

282,418

 

 

$

41,494

 

 

$

323,912

 

 

$

138,374

 

 

$

16,144

 

 

$

154,518

 

 

The table below presents revenue information by category. Prior year amounts presented below have been reclassified to conform to the current period revenue category presentation:

 

 

Three Months Ended

 

 

 

March 31,

 

(In thousands)

 

2023

 

 

2022

 

Subscriber Solutions

 

$

79,336

 

 

$

56,722

 

Access & Aggregation Solutions

 

 

96,820

 

 

 

97,796

 

Optical Networking Solutions

 

 

147,756

 

 

 

—

 

Total

 

$

323,912

 

 

$

154,518

 

 
Information about Receivables, Contract Assets, and Unearned Revenue from Contracts with Customers

The following table provides information about receivables, contract assets and unearned revenue from contracts with customers:

 

 

 

As of

 

 

As of

 

(In thousands)

 

March 31, 2023

 

 

December 31, 2022

 

Accounts receivable, net

 

$

262,043

 

 

$

279,435

 

Contract assets(1)

 

$

1,972

 

 

$

1,852

 

Unearned revenue

 

$

55,611

 

 

$

41,193

 

Non-current unearned revenue

 

$

24,907

 

 

$

19,239

 
v3.23.2
Income Taxes (Tables)
 3 Months Ended
Mar. 31, 2023
Income Tax Disclosure [Abstract]  
Summary of Supplemental Balance Sheet Information Related to Deferred Tax Assets (Liabilities)

Supplemental balance sheet information related to deferred tax assets (liabilities) is as follows:

 

 

 

As of March 31, 2023

 

(In thousands)

 

Deferred Tax Assets (Liabilities)

 

 

Valuation Allowance

 

 

Deferred Tax Assets (Liabilities), net

 

Domestic

 

$

75,432

 

 

$

(3,177

)

 

$

72,255

 

International

 

 

(40,450

)

 

 

(2,024

)

 

 

(42,474

)

Total

 

$

34,982

 

 

$

(5,201

)

 

$

29,781

 

 

 

 

As of December 31, 2022

 

(In thousands)

 

Deferred Tax Assets (Liabilities)

 

 

Valuation Allowance

 

 

Deferred Tax Assets (Liabilities), net

 

Domestic

 

$

61,726

 

 

$

(3,177

)

 

$

58,549

 

International

 

 

(50,315

)

 

 

(2,024

)

 

 

(52,339

)

Total

 

$

11,411

 

 

$

(5,201

)

 

$

6,210

 
v3.23.2
Stock-Based Compensation (Tables)
 3 Months Ended
Mar. 31, 2023
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]  
Stock-Based Compensation Expense Related to Stock Options, RSUs and Restricted Stock

The following table summarizes the RSUs and restricted stock outstanding as of December 31, 2022 and March 31, 2023 and the changes that occurred during the three months ended March 31, 2023:

 

 

 

Number of
Shares
(in thousands)

 

 

Weighted Avg. Grant Date Fair Value
(per share)

 

Unvested RSUs and restricted stock outstanding, December 31, 2022

 

 

1,086

 

 

$

17.54

 

RSUs and restricted stock granted

 

 

1,296

 

 

$

17.60

 

RSUs and restricted stock vested

 

 

(12

)

 

$

20.51

 

RSUs and restricted stock forfeited

 

 

(10

)

 

$

15.32

 

Unvested RSUs and restricted stock outstanding, March 31, 2023

 

 

2,360

 

 

$

17.65

 
Summary of Stock Options Outstanding

The following table summarizes ADTRAN Holdings, Inc. stock options outstanding as of December 31, 2022 and March 31, 2023 and the changes that occurred during the three months ended March 31, 2023:

 

 

Number of
Stock Options
(in thousands)

 

 

Weighted Avg.
Exercise Price
(per share)

 

 

Weighted Avg.
Remaining
Contractual
Life
(in years)

 

 

Aggregate
Intrinsic Value
(in thousands)

 

Stock options outstanding, December 31, 2022

 

 

3,148

 

 

$

14.37

 

 

 

3.42

 

 

$

16,251

 

Stock options exercised

 

 

(6

)

 

$

9.82

 

 

 

 

 

 

 

Stock options forfeited

 

 

(21

)

 

$

12.21

 

 

 

 

 

 

 

Stock options expired

 

 

(7

)

 

$

19.00

 

 

 

 

 

 

 

Stock options outstanding, March 31, 2023

 

 

3,114

 

 

$

14.38

 

 

 

3.17

 

 

$

10,198

 

Stock options exercisable, March 31, 2023

 

 

1,698

 

 

$

15.96

 

 

 

1.70

 

 

$

4,436

 
ADVA Optical Networking SE [Member]  
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]  
Summary of Stock Options Outstanding

The following table summarizes ADVA Optical Networking SE stock options outstanding as of December 31, 2022 and March 31, 2023 and the changes that occurred during the three months ended March 31, 2023:

 

 

 

Number of
Options
(In thousands)

 

 

Weighted
Average
Exercise Price
(Per share)

 

 

Weighted Avg.
Remaining
Contractual Life
in Years

 

 

Aggregate
Intrinsic Value
(In thousands)

 

Stock options outstanding, December 31, 2022

 

 

81

 

 

$

8.58

 

 

 

4.00

 

 

$

1,222

 

Stock options exercised

 

 

—

 

 

$

—

 

 

 

 

 

 

 

Stock options forfeited

 

 

—

 

 

$

—

 

 

 

 

 

 

 

Stock options outstanding, March 31, 2023

 

 

81

 

 

$

8.67

 

 

 

3.75

 

 

$

1,198

 

Stock options exercisable, March 31, 2023

 

 

27

 

 

$

7.45

 

 

 

2.14

 

 

$

424

 
v3.23.2
Investments (Tables)
 3 Months Ended
Mar. 31, 2023
Investments, Debt and Equity Securities [Abstract]  
Debt Securities and Other Investments, Included on Condensed Consolidated Balance Sheet and Recorded at Fair Value

Debt Securities and Other Investments

The following debt securities and other investments were included on the Condensed Consolidated Balance Sheets and recorded at fair value:

 

 

 

As of March 31, 2023

 

 

 

Amortized

 

 

Gross Unrealized

 

 

Fair

 

(In thousands)

 

Cost

 

 

Gains

 

 

Losses

 

 

Value

 

Corporate bonds

 

$

2,218

 

 

$

4

 

 

$

(63

)

 

$

2,159

 

Municipal fixed-rate bonds

 

 

185

 

 

 

—

 

 

 

(4

)

 

 

181

 

Asset-backed bonds

 

 

734

 

 

 

1

 

 

 

(20

)

 

 

715

 

Mortgage/Agency-backed bonds

 

 

1,699

 

 

 

1

 

 

 

(82

)

 

 

1,618

 

U.S. government bonds

 

 

4,299

 

 

 

5

 

 

 

(151

)

 

 

4,153

 

Foreign government bonds

 

 

406

 

 

 

—

 

 

 

(19

)

 

 

387

 

Available-for-sale debt securities held at fair value

 

$

9,541

 

 

$

11

 

 

$

(339

)

 

$

9,213

 

 

 

 

As of December 31, 2022

 

 

 

Amortized

 

 

Gross Unrealized

 

 

Fair

 

(In thousands)

 

Cost

 

 

Gains

 

 

Losses

 

 

Value

 

Corporate bonds

 

$

2,538

 

 

$

5

 

 

$

(81

)

 

$

2,462

 

Municipal fixed-rate bonds

 

 

185

 

 

 

—

 

 

 

(5

)

 

 

180

 

Asset-backed bonds

 

 

818

 

 

 

1

 

 

 

(24

)

 

 

795

 

Mortgage/Agency-backed bonds

 

 

1,853

 

 

 

—

 

 

 

(105

)

 

 

1,748

 

U.S. government bonds

 

 

3,870

 

 

 

3

 

 

 

(188

)

 

 

3,685

 

Foreign government bonds

 

 

407

 

 

 

—

 

 

 

(24

)

 

 

383

 

Available-for-sale debt securities held at fair value

 

$

9,671

 

 

$

9

 

 

$

(427

)

 

$

9,253

 
Contractual Maturities of Debt Securities and Other Investments

The contractual maturities related to debt securities and other investments were as follows:

 

 

 

As of March 31, 2023

(In thousands)

 

Corporate
bonds

 

 

Municipal
fixed-rate
bonds

 

 

Asset-
backed
bonds

 

 

Mortgage/
Agency-
backed bonds

 

 

U.S. government
bonds

 

 

Foreign government bonds

 

 

Less than one year

 

$

369

 

 

$

181

 

 

$

—

 

 

$

—

 

 

$

508

 

 

$

—

 

 

One to two years

 

 

966

 

 

 

—

 

 

 

169

 

 

 

166

 

 

 

3,174

 

 

 

387

 

 

Two to three years

 

 

824

 

 

 

—

 

 

 

49

 

 

 

600

 

 

 

348

 

 

 

—

 

 

Three to five years

 

 

—

 

 

 

—

 

 

 

337

 

 

 

242

 

 

 

123

 

 

 

—

 

 

Five to ten years

 

 

—

 

 

 

—

 

 

 

—

 

 

 

238

 

 

 

—

 

 

 

—

 

 

More than ten years

 

 

—

 

 

 

—

 

 

 

160

 

 

 

372

 

 

 

—

 

 

 

—

 

 

Total

 

$

2,159

 

 

$

181

 

 

$

715

 

 

$

1,618

 

 

$

4,153

 

 

$

387

 

 
Gross Realized Gains and Losses on Sale of Debt Securities The following table presents the gross realized gains and losses related to its debt securities:

 

 

 

Three Months Ended

 

 

 

March 31,

 

(In thousands)

 

2023

 

 

2022

 

     Gross realized gain on debt securities

 

$

4

 

 

$

12

 

     Gross realized loss on debt securities

 

 

(11

)

 

 

(40

)

Total (loss) gain recognized, net

 

$

(7

)

 

$

(28

)
Realized and Unrealized Gains and Losses related to Marketable Equity Securities

Realized and unrealized gains and losses related to marketable equity securities were as follows:

 

 

 

Three Months Ended

 

 

 

March 31,

 

(In thousands)

 

2023

 

 

2022

 

     Realized (loss) gain on equity securities sold

 

$

13

 

 

$

(25

)

     Unrealized (loss) gain on equity securities held

 

 

1,246

 

 

 

(3,362

)

Total (loss) gain recognized, net

 

$

1,259

 

 

$

(3,387

)
Cash Equivalents and Investments held at Fair Value

The Company’s cash equivalents and investments held at fair value are categorized into this hierarchy as follows:

 

 

 

 

 

 

Fair Value Measurements as of March 31, 2023 Using

 

(In thousands)

 

Fair Value

 

 

Quoted Prices
in Active
Market for
Identical
Assets
(Level 1)

 

 

Significant
Other
Observable
Inputs
(Level 2)

 

 

Significant Unobservable Inputs
(Level 3)

 

Cash equivalents

 

 

 

 

 

 

 

 

 

 

 

 

US government securities

 

$

175

 

 

$

175

 

 

$

—

 

 

$

—

 

Money market funds

 

 

243

 

 

 

243

 

 

 

—

 

 

 

—

 

Available-for-sale debt securities

 

 

 

 

 

 

 

 

 

 

 

 

Corporate bonds

 

 

2,159

 

 

 

—

 

 

 

2,159

 

 

 

—

 

Municipal fixed-rate bonds

 

 

181

 

 

 

—

 

 

 

181

 

 

 

—

 

Asset-backed bonds

 

 

715

 

 

 

—

 

 

 

715

 

 

 

—

 

Mortgage/Agency-backed bonds

 

 

1,618

 

 

 

—

 

 

 

1,618

 

 

 

—

 

U.S. government bonds

 

 

4,153

 

 

 

4,153

 

 

 

—

 

 

 

—

 

Foreign government securities

 

 

387

 

 

 

—

 

 

 

387

 

 

 

—

 

Marketable equity securities

 

 

 

 

 

 

 

 

 

 

 

 

Marketable equity securities – various industries

 

 

821

 

 

 

821

 

 

 

—

 

 

 

—

 

Deferred compensation plan assets

 

 

24,013

 

 

 

24,013

 

 

 

—

 

 

 

—

 

Total

 

$

34,465

 

 

$

29,405

 

 

$

5,060

 

 

$

—

 

 

 

 

 

 

 

 

Fair Value Measurements as of December 31, 2022 Using

 

(In thousands)

 

Fair Value

 

 

Quoted Prices
in Active
Market for
Identical
Assets
(Level 1)

 

 

Significant
Other
Observable
Inputs
(Level 2)

 

 

Significant Unobservable Inputs
(Level 3)

 

Cash equivalents

 

 

 

 

 

 

 

 

 

 

 

 

Money market funds

 

$

228

 

 

$

228

 

 

$

—

 

 

$

—

 

Available-for-sale debt securities

 

 

 

 

 

 

 

 

 

 

 

 

Corporate bonds

 

 

2,462

 

 

 

—

 

 

 

2,462

 

 

 

—

 

Municipal fixed-rate bonds

 

 

180

 

 

 

—

 

 

 

180

 

 

 

—

 

Asset-backed bonds

 

 

795

 

 

 

—

 

 

 

795

 

 

 

—

 

Mortgage/Agency-backed bonds

 

 

1,748

 

 

 

—

 

 

 

1,748

 

 

 

—

 

U.S. government bonds

 

 

3,685

 

 

 

3,685

 

 

 

—

 

 

 

—

 

Foreign government bonds

 

 

383

 

 

 

—

 

 

 

383

 

 

 

—

 

Marketable equity securities

 

 

 

 

 

 

 

 

 

 

 

 

Marketable equity securities – various industries

 

 

804

 

 

 

804

 

 

 

—

 

 

 

—

 

Deferred compensation plan assets

 

 

22,942

 

 

 

22,942

 

 

 

—

 

 

 

—

 

Total

 

$

33,227

 

 

$

27,659

 

 

$

5,568

 

 

$

—

 
v3.23.2
Inventory (Tables)
 3 Months Ended
Mar. 31, 2023
Inventory Disclosure [Abstract]  
Components of Inventory

Inventory consisted of the following:

 

 

 

As of

 

 

As of

 

(In thousands)

 

March 31, 2023

 

 

December 31, 2022

 

Raw materials

 

$

167,086

 

 

$

186,346

 

Work in process

 

 

7,383

 

 

 

12,087

 

Finished goods

 

 

241,822

 

 

 

229,098

 

Total inventory, net

 

$

416,291

 

 

$

427,531

 
v3.23.2
Property, Plant and Equipment (Tables)
 3 Months Ended
Mar. 31, 2023
Property, Plant and Equipment [Abstract]  
Property, Plant and Equipment

Property, plant and equipment consisted of the following:

 

 

 

As of

 

 

As of

 

(In thousands)

 

March 31, 2023

 

 

December 31, 2022

 

Engineering and other equipment

 

$

173,968

 

 

$

170,785

 

Building

 

 

83,287

 

 

 

82,932

 

Computer hardware and software

 

 

82,682

 

 

 

80,455

 

Building and land improvements

 

 

51,081

 

 

 

47,861

 

Furniture and fixtures

 

 

23,525

 

 

 

22,403

 

Land

 

 

5,367

 

 

 

5,364

 

     Total property, plant and equipment

 

 

419,910

 

 

 

409,800

 

Less: accumulated depreciation

 

 

(307,941

)

 

 

(299,101

)

     Total property, plant and equipment, net

 

$

111,969

 

 

$

110,699

 
v3.23.2
Goodwill (Tables)
 3 Months Ended
Mar. 31, 2023
Goodwill Disclosure [Abstract]  
Summary of Changes in Carrying Amount of Goodwill

The changes in the carrying amount of goodwill for the three months ended March 31, 2023 are as follows:

 

(In thousands)

 

Network Solutions

 

 

Services & Support

 

 

Total

 

As of December 31, 2022

 

$

298,280

 

 

$

83,444

 

 

$

381,724

 

Foreign currency translation adjustments

 

 

3,139

 

 

 

892

 

 

 

4,031

 

As of March 31, 2023

 

$

301,419

 

 

$

84,336

 

 

$

385,755

 
v3.23.2
Intangible Assets (Tables)
 3 Months Ended
Mar. 31, 2023
Intangible Assets, Net (Excluding Goodwill) [Abstract]  
Summary of Intangible Assets

Intangible assets consisted of the following:

 

 

 

 

As of March 31, 2023

 

 

As of December 31, 2022

 

(In thousands)

Weighted Average Useful Life
(in years)

 

 

Gross Carrying Amount

 

 

Accumulated Amortization

 

 

Net Book Value

 

 

Gross Carrying Amount

 

 

Accumulated Amortization

 

 

Net Book Value

 

Customer relationships

 

10.9

 

 

$

54,103

 

 

$

(12,180

)

 

$

41,923

 

 

$

55,517

 

 

$

(12,772

)

 

$

42,745

 

Backlog

 

1.6

 

 

 

56,382

 

 

 

(35,348

)

 

 

21,034

 

 

 

55,782

 

 

 

(22,725

)

 

 

33,057

 

Developed technology

 

8.5

 

 

 

323,723

 

 

 

(31,604

)

 

 

292,119

 

 

 

320,364

 

 

 

(21,856

)

 

 

298,508

 

Licensed technology

 

9.0

 

 

 

5,900

 

 

 

(3,305

)

 

 

2,595

 

 

 

5,900

 

 

 

(3,141

)

 

 

2,759

 

Licensing agreements

 

8.5

 

 

 

560

 

 

 

(316

)

 

 

244

 

 

 

560

 

 

 

(298

)

 

 

262

 

Patents

 

7.3

 

 

 

500

 

 

 

(449

)

 

 

51

 

 

 

500

 

 

 

(431

)

 

 

69

 

Trade names

 

3.0

 

 

 

29,167

 

 

 

(7,847

)

 

 

21,320

 

 

 

29,066

 

 

 

(5,255

)

 

 

23,811

 

     Total

 

 

 

$

470,335

 

 

$

(91,049

)

 

$

379,286

 

 

$

467,689

 

 

$

(66,478

)

 

$

401,211

 
Estimated Future Amortization Expense Related to Intangible Assets

Estimated future amortization expense of intangible assets was as follows:

 

 

 

As of

 

(In thousands)

 

March 31, 2023

 

2023

 

$

56,855

 

2024

 

 

58,129

 

2025

 

 

46,558

 

2026

 

 

43,292

 

2027

 

 

41,922

 

Thereafter

 

 

132,530

 

     Total

 

$

379,286

 
v3.23.2
Hedging (Tables)
 3 Months Ended
Mar. 31, 2023
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Schedule of Fair Values of Derivative Instruments

The fair values of the Company's derivative instruments recorded in the Condensed Consolidated Balance Sheet as of March 31, 2023 and December 31, 2022 were as follows:

 

(In thousands)

 

Balance Sheet Location

 

March 31, 2023

 

 

December 31, 2022

 

Derivatives Not Designated as Hedging Instruments (Level 2):

 

 

 

 

 

 

 

 

Foreign exchange contracts – derivative assets

 

Other receivables

 

$

11,831

 

 

$

11,992

 

Foreign exchange contracts – derivative liabilities

 

Accounts payable

 

$

(351

)

 

$

(633

)

Total derivatives

 

 

 

$

11,480

 

 

$

11,359

 

The change in the fair values of the Company's derivative instruments recorded in the Condensed Consolidated Statements of Income during the three months ended March 31, 2023 and 2022 were as follows:

 

 

 

 

 

Three Months Ended

 

 

 

 

 

March 31,

 

(In thousands)

 

Income Statement
Location

 

2023

 

 

2022

 

Derivatives Not Designated as Hedging Instruments:

 

 

 

 

 

 

 

 

Foreign exchange contracts

 

Other income (expense), net

 

$

(69

)

 

$

—

 
v3.23.2
Revolving Credit Agreement (Tables)
 3 Months Ended
Mar. 31, 2023
Debt Disclosure [Abstract]  
Carrying Amount Current and Non-current of Revolving Agreement

The carrying amounts of the Company's current and non-current revolving credit agreements in its Condensed Consolidated Balance Sheets were as follows:

 

 

 

(As restated)

 

 

 

 

 

 

As of

 

 

As of

 

(In thousands)

 

March 31, 2023

 

 

December 31, 2022

 

New Nord/LB revolving line of credit

 

$

10,843

 

 

$

—

 

Nord/LB revolving line of credit

 

 

—

 

 

 

16,091

 

Syndicated credit agreement working capital line of credit

 

 

—

 

 

 

10,727

 

DZ bank revolving line of credit

 

 

—

 

 

 

9,118

 

Total current revolving credit agreements

 

$

10,843

 

 

$

35,936

 

 

 

 

(As restated)

 

 

 

 

 

 

As of

 

 

As of

 

(In thousands)

 

March 31, 2023

 

 

December 31, 2022

 

Wells Fargo credit agreement

 

$

180,000

 

 

$

60,000

 

Total non-current revolving credit agreement

 

$

180,000

 

 

$

60,000

 
v3.23.2
Notes Payable (Tables)
 3 Months Ended
Mar. 31, 2023
Debt Disclosure [Abstract]  
Carrying Amounts of Notes Payables

The carrying amounts of the Company's notes payable in its Condensed Consolidated Balance Sheets were as follows:

 

 

 

Fair Value as of

 

 

Carrying Value as of

 

 

Carrying Value as of

 

(In thousands)

 

March 31, 2023

 

 

March 31, 2023

 

 

December 31, 2022

 

Syndicated credit agreement notes payable

 

$

—

 

 

$

—

 

 

$

24,598

 

Total Notes Payable

 

$

—

 

 

$

—

 

 

$

24,598

 
v3.23.2
Employee Benefit Plans (Tables)
 3 Months Ended
Mar. 31, 2023
Retirement Benefits [Abstract]  
Schedule of the Components of Net Periodic Pension Cost

The following table summarizes the components of net periodic pension cost related to a defined benefit pension plan covering employees in certain foreign countries:

 

 

 

Three Months Ended

 

 

 

March 31,

 

(In thousands)

 

2023

 

 

2022

 

Service cost

 

$

398

 

 

$

257

 

Interest cost

 

 

(32

)

 

 

222

 

Expected return on plan assets

 

 

58

 

 

 

(470

)

Amortization of actuarial losses

 

 

6

 

 

 

89

 

Net periodic pension cost

 

$

430

 

 

$

98

 
v3.23.2
Equity (Tables)
 3 Months Ended
Mar. 31, 2023
Equity [Abstract]  
Changes in Accumulated Other Comprehensive Income (Loss), Net of Tax, by Component

The following tables present the changes in accumulated other comprehensive income (loss), net of tax, by component:

 

 

Three Months Ended March 31, 2023

 

(In thousands)

 

Unrealized
(Losses) Gains
on
Available-
for-Sale
Securities

 

 

Defined
Benefit Plan
Adjustments

 

 

Foreign
Currency
Adjustments

 

 

ASU 2018-02 Adoption

 

 

Total

 

Balance as of December 31, 2022

 

$

(836

)

 

$

(1,016

)

 

$

48,180

 

 

$

385

 

 

$

46,713

 

Other comprehensive income before
   reclassifications

 

 

83

 

 

 

—

 

 

 

8,678

 

 

 

—

 

 

 

8,761

 

Amounts reclassified from accumulated other
   comprehensive (loss) income

 

 

(14

)

 

 

35

 

 

 

—

 

 

 

—

 

 

 

21

 

Net current period other comprehensive income

 

 

69

 

 

 

35

 

 

 

8,678

 

 

 

—

 

 

 

8,782

 

Less: Comprehensive income attributable to non-controlling interest, net of tax

 

 

—

 

 

 

—

 

 

 

244

 

 

 

—

 

 

 

244

 

Balance as of March 31, 2023

 

$

(767

)

 

$

(981

)

 

$

56,614

 

 

$

385

 

 

$

55,251

 

 

 

 

Three Months Ended March 31, 2022

 

(In thousands)

 

Unrealized
(Losses)
Gains
on
Available-
for-Sale
Securities

 

 

Defined
Benefit Plan
Adjustments

 

 

Foreign
Currency
Adjustments

 

 

ASU 2018-02 Adoption

 

 

Total

 

Balance as of December 31, 2021

 

$

(552

)

 

$

(5,613

)

 

$

(6,134

)

 

$

385

 

 

$

(11,914

)

Other comprehensive loss before
   reclassifications

 

 

(975

)

 

 

—

 

 

 

(905

)

 

 

—

 

 

 

(1,880

)

Amounts reclassified from accumulated other
   comprehensive income (loss)

 

 

251

 

 

 

(13

)

 

 

—

 

 

 

—

 

 

 

238

 

Net current period other comprehensive income (loss)

 

 

(724

)

 

 

(13

)

 

 

(905

)

 

 

—

 

 

 

(1,642

)

Balance as of March 31, 2022

 

$

(1,276

)

 

$

(5,626

)

 

$

(7,039

)

 

$

385

 

 

$

(13,556

)

 

 
Reclassifications Out of Accumulated Other Comprehensive Loss

The following tables present the details of reclassifications out of accumulated other comprehensive loss:

 

 

 

Three Months Ended March 31, 2023

(In thousands)

 

Amount
Reclassified
from
Accumulated
Other
Comprehensive
(Loss) Income

 

 

Affected Line Item in the
Statement Where Net
(Loss) Income Is Presented

Unrealized gain (loss) on available-for-sale securities:

 

 

 

 

 

Net realized gain on sales of securities

 

$

18

 

 

Net investment (loss) gain

Defined benefit plan adjustments – actuarial loss

 

 

(51

)

 

(1)

Total reclassifications for the period, before tax

 

 

(33

)

 

 

Tax benefit

 

 

12

 

 

 

Total reclassifications for the period, net of tax

 

$

(21

)

 

 

 

(1)
A part of the computation of net periodic pension cost, which is included in other income, net in the Condensed Consolidated Statements of Loss.

 

 

Three Months Ended March 31, 2022

(In thousands)

 

Amount
Reclassified
from
Accumulated
Other
Comprehensive
(Loss) Income

 

 

Affected Line Item in the
Statement Where Net
(Loss) Income Is Presented

Unrealized gain (loss) on available-for-sale securities:

 

 

 

 

 

Net realized loss on sales of securities

 

$

(330

)

 

Net investment (loss) gain

Defined benefit plan adjustments – actuarial gain

 

 

19

 

 

(1)

Total reclassifications for the period, before tax

 

 

(311

)

 

 

Tax benefit

 

 

73

 

 

 

Total reclassifications for the period, net of tax

 

$

(238

)

 

 
(1)
A part of the computation of net periodic pension cost, which is included in other income, net in the Condensed Consolidated Statements of Loss.
Tax Effects Related to the Change in Each Component of Other Comprehensive Income (Loss)

The following table presents the tax effects related to the change in each component of other comprehensive income (loss):

 

 

Three Months Ended

 

 

Three Months Ended

 

 

 

March 31, 2023

 

 

March 31, 2022

 

(In thousands)

 

Before-Tax
Amount

 

 

Tax
(Expense)
Benefit

 

 

Net-of-Tax
Amount

 

 

Before-Tax
Amount

 

 

Tax
(Expense)
Benefit

 

 

Net-of-Tax
Amount

 

Unrealized gain (loss) on available-for-sale
   securities

 

$

109

 

 

$

(26

)

 

$

83

 

 

$

(1,283

)

 

$

308

 

 

$

(975

)

Reclassification adjustment for amounts related to
   available-for-sale investments included in net (loss) gain

 

 

(18

)

 

 

4

 

 

 

(14

)

 

 

330

 

 

 

(79

)

 

 

251

 

Reclassification adjustment for amounts related to
   defined benefit plan adjustments included in net (loss) gain

 

 

51

 

 

 

(16

)

 

 

35

 

 

 

(19

)

 

 

6

 

 

 

(13

)

Foreign currency translation adjustments

 

 

8,678

 

 

 

—

 

 

 

8,678

 

 

 

(905

)

 

 

—

 

 

 

(905

)

Total Other Comprehensive Income (Loss)

 

$

8,820

 

 

$

(38

)

 

$

8,782

 

 

$

(1,877

)

 

$

235

 

 

$

(1,642

)
v3.23.2
Redeemable Non-controlling Interest (Tables)
 3 Months Ended
Mar. 31, 2023
Redeemable Noncontrolling Interest, Equity, Carrying Amount [Abstract]  
Summary of Redeemable Non-controlling Interest Activity

The following table summarizes the redeemable non-controlling interest activity for the three months ended March 31, 2023:

 

 

 

Three Months Ended

 

(In thousands)

 

March 31, 2023

 

Balance at beginning of period

 

$

—

 

Reclassification of non-controlling interests

 

 

443,757

 

Redemption of redeemable non-controlling interest

 

 

(1,519

)

Net income attributable to redeemable non-controlling interests

 

 

2,809

 

Annual recurring compensation earned

 

 

(2,809

)

Translation adjustment

 

 

430

 

Balance as of March 31, 2023

 

$

442,668

 
v3.23.2
Loss Per Share (Tables)
 3 Months Ended
Mar. 31, 2023
Earnings Per Share [Abstract]  
Summary of Calculation of Basic and Diluted Loss Per Share

The calculation of basic and diluted loss per share is as follows:

 

 

 

Three Months Ended

 

 

 

March 31,

 

(In thousands, except per share amounts)

 

2023

 

 

2022

 

Numerator

 

 

 

 

 

 

Net loss attributable to ADTRAN Holdings, Inc.

 

$

(34,464

)

 

$

(1,127

)

Denominator

 

 

 

 

 

 

Weighted average number of shares – basic

 

 

78,358

 

 

 

49,113

 

Effect of dilutive securities

 

 

 

 

 

 

Stock options

 

 

—

 

 

 

—

 

PSUs, RSUs and restricted stock

 

 

—

 

 

 

—

 

Weighted average number of shares – diluted

 

 

78,358

 

 

 

49,113

 

Loss per share attributable to ADTRAN Holdings, Inc. – basic

 

$

(0.44

)

 

$

(0.02

)

Loss per share attributable to ADTRAN Holdings, Inc. – diluted

 

$

(0.44

)

 

$

(0.02

)
v3.23.2
Segment Information (Tables)
 3 Months Ended
Mar. 31, 2023
Segment Reporting [Abstract]  
Revenue and Gross Profit of Reportable Segments

The following table presents information about the revenue and gross profit of its reportable segments:

 

 

Three Months Ended

 

 

 

March 31, 2023

 

 

March 31, 2022

 

(In thousands)

 

Revenue

 

 

Gross Profit

 

 

Revenue

 

 

Gross Profit

 

Network Solutions

 

$

282,418

 

 

$

63,288

 

 

$

138,374

 

 

$

47,721

 

Services & Support

 

 

41,494

 

 

 

24,520

 

 

 

16,144

 

 

 

6,595

 

Total

 

$

323,912

 

 

$

87,808

 

 

$

154,518

 

 

$

54,316

 
Disaggregate of Revenue by Reportable Segment and Revenue Category

The following table disaggregates revenue by reportable segment and revenue category. Prior year amounts presented below have been reclassified to conform to the current period revenue category presentation:

 

 

 

Three Months Ended

 

 

 

March 31, 2023

 

 

March 31, 2022

 

(In thousands)

 

Network Solutions

 

 

Services & Support

 

 

Total

 

 

Network Solutions

 

 

Services & Support

 

 

Total

 

Subscriber Solutions

 

$

70,287

 

 

$

9,049

 

 

$

79,336

 

 

$

52,390

 

 

$

4,332

 

 

$

56,722

 

Access & Aggregation Solutions

 

 

84,554

 

 

 

12,266

 

 

 

96,820

 

 

 

85,984

 

 

 

11,812

 

 

 

97,796

 

Optical Networking Solutions

 

 

127,577

 

 

 

20,179

 

 

 

147,756

 

 

 

—

 

 

 

—

 

 

 

—

 

Total

 

$

282,418

 

 

$

41,494

 

 

$

323,912

 

 

$

138,374

 

 

$

16,144

 

 

$

154,518

 

 

The table below presents revenue information by category. Prior year amounts presented below have been reclassified to conform to the current period revenue category presentation:

 

 

Three Months Ended

 

 

 

March 31,

 

(In thousands)

 

2023

 

 

2022

 

Subscriber Solutions

 

$

79,336

 

 

$

56,722

 

Access & Aggregation Solutions

 

 

96,820

 

 

 

97,796

 

Optical Networking Solutions

 

 

147,756

 

 

 

—

 

Total

 

$

323,912

 

 

$

154,518

 

 
Revenue Information by Geographic Area

The following table presents revenue information by geographic area:

 

 

 

Three Months Ended

 

 

 

March 31,

 

(In thousands)

 

2023

 

 

2022

 

United States

 

$

131,466

 

 

$

99,048

 

Germany

 

 

76,286

 

 

 

10,920

 

United Kingdom

 

 

57,397

 

 

 

30,388

 

Other international

 

 

58,763

 

 

 

14,162

 

Total

 

$

323,912

 

 

$

154,518

 
v3.23.2
Liability for Warranty Returns (Tables)
 3 Months Ended
Mar. 31, 2023
Product Warranties Disclosures [Abstract]  
Summary of Warranty Expense and Write-off Activity The warranty expense and write-off activity for the three months ended March 31, 2023 and 2022 are summarized as follows:

 

 

 

Three Months Ended

 

 

 

March 31,

 

(In thousands)

 

2023

 

 

2022

 

Balance at beginning of period

 

$

7,196

 

 

$

5,403

 

Plus: Amounts charged to cost and expenses

 

 

1,077

 

 

 

344

 

Plus: Foreign currency translation adjustments

 

 

26

 

 

 

—

 

Less: Deductions

 

 

(1,099

)

 

 

(604

)

Balance at end of period

 

$

7,200

 

 

$

5,143

 
v3.23.2
Restructuring (Tables)
 3 Months Ended
Mar. 31, 2023
Restructuring and Related Activities [Abstract]  
Schedule of Reconciliation of Restructuring Liability

A reconciliation of the beginning and ending restructuring liability, which is included in accrued wages and benefits in the Condensed Consolidated Balance Sheets as of March 31, 2023 and December 31, 2022, is as follows:

 

 

 

Three Months Ended

 

(In thousands)

 

March 31, 2023

 

Balance at beginning of period

 

$

159

 

Plus: Amounts charged to cost and expense

 

 

2,437

 

Less: Amounts paid

 

 

(1,574

)

Balance as of March 31, 2023

 

$

1,022

 

 

 

 

For the Year Ended

 

(In thousands)

 

December 31, 2022

 

Balance as of December 31, 2021

 

$

1,514

 

Plus: Amounts charged to cost and expense

 

 

1,629

 

Less: Amounts paid

 

 

(2,984

)

Balance as of December 31, 2022

 

$

159

 
Schedule of Components of Restructuring Expenses

Restructuring expenses included in the Condensed Consolidated Statements of (Loss) Income are for the three months ended March 31, 2023 and 2022:

 

 

 

Three Months Ended

 

 

 

March 31,

 

(In thousands)

 

2023

 

 

2022

 

 

 

 

 

 

 

 

   Network Solutions - Cost of revenue

 

$

58

 

 

$

—

 

   Services & Support - Cost of revenue

 

 

18

 

 

 

—

 

Cost of revenue

 

$

76

 

 

$

—

 

Selling, general and administrative expenses (1)

 

 

2,180

 

 

 

2

 

Research and development expenses (1)

 

 

181

 

 

 

—

 

Total restructuring expenses

 

$

2,437

 

 

$

2

 

 

 

The following table represents the components of restructuring expense by geographic area for the three months ended March 31, 2023 and 2022:

 

 

 

Three Months Ended

 

 

 

March 31,

 

(In thousands)

 

2023

 

 

2022

 

United States

 

$

1,119

 

 

$

2

 

International

 

 

1,318

 

 

 

—

 

Total restructuring expenses

 

$

2,437

 

 

$

2

 
v3.23.2
Summary of Significant Accounting Policies - Additional Information (Details)
$ / shares in Units, $ in Thousands
Mar. 31, 2023
USD ($)
Countries
$ / shares
shares
Jan. 16, 2023
$ / shares
Jan. 16, 2023
€ / shares
Dec. 31, 2022
USD ($)
$ / shares
shares
Oct. 18, 2022
shares
Aug. 30, 2021
$ / shares
shares
Summary Of Significant Accounting Policy [Line Items]            
Number of countries | Countries 100          
Revolving credit agreements outstanding $ 10,843     $ 35,936    
Non-current revolving credit agreement outstanding 180,000     60,000    
Deferred tax assets 81,631     67,839    
Total Assets 1,938,595     1,943,494    
Deferred tax liabilities 51,850     61,629    
Total Liabilities 675,765     639,881    
Total liabilities, non-controlling interest and equity $ 1,938,595     $ 1,943,494    
Common stock, par value | $ / shares $ 0.01     $ 0.01   $ 0.01
Common stock, shares outstanding | shares 78,361,000     77,889,000    
Issuance of shares of common stock | shares           27,994,595
Adjustment [Member]            
Summary Of Significant Accounting Policy [Line Items]            
Revolving credit agreements outstanding $ (180,000)          
Non-current revolving credit agreement outstanding $ 180,000          
ASU 2021-08 [Member]            
Summary Of Significant Accounting Policy [Line Items]            
Change in Accounting Principle, Accounting Standards Update, Adopted [true false] true          
Change in Accounting Principle, Accounting Standards Update, Adoption Date Jul. 01, 2022          
ADVA Optical Networking SE [Member]            
Summary Of Significant Accounting Policy [Line Items]            
Equity method ownership percentage 34.60%     34.70%    
ADVA Optical Networking SE [Member] | Maximum [Member]            
Summary Of Significant Accounting Policy [Line Items]            
Number of additional shares authorized to purchase | shares         15,346,544  
ADVA Optical Networking SE [Member] | DPLTA [Member]            
Summary Of Significant Accounting Policy [Line Items]            
Share Price | $ / shares   $ 17.21        
Annual recurring compensation per share | € / shares     € 0.59      
Annual recurring compensation net per share | € / shares     € 0.52      
v3.23.2
Summary of Significant Accounting Policies - Summary of Impact of Revision to Specific Line Items in Consolidated Financial Statements (Details) - USD ($)
$ in Thousands
Mar. 31, 2023
Dec. 31, 2022
Revolving credit agreements outstanding $ 10,843 $ 35,936
Total Current Liabilities 342,204 428,575
Non-current revolving credit agreement outstanding 180,000 60,000
Deferred tax assets 81,631 67,839
Total Assets 1,938,595 1,943,494
Deferred tax liabilities 51,850 61,629
Total Liabilities 675,765 $ 639,881
As Reported [Member]    
Revolving credit agreements outstanding 190,843  
Total Current Liabilities 522,204  
Adjustment [Member]    
Revolving credit agreements outstanding (180,000)  
Total Current Liabilities (180,000)  
Non-current revolving credit agreement outstanding $ 180,000  
v3.23.2
Business Combination - Additional Information (Details)
$ / shares in Units, $ in Thousands
 3 Months Ended
Jul. 15, 2022
USD ($)
$ / shares
Aug. 30, 2021
USD ($)
$ / shares
shares
Mar. 31, 2023
USD ($)
$ / shares
shares
Mar. 31, 2022
USD ($)
Dec. 31, 2022
USD ($)
$ / shares
shares
Aug. 30, 2021
€ / shares
shares
Business Acquisition [Line Items]            
Common stock, par value | $ / shares   $ 0.01 $ 0.01   $ 0.01  
Common stock, shares outstanding | shares     78,361,000   77,889,000  
Common stock, reserved for future issuance | shares   27,994,595       27,994,595
Goodwill     $ 385,755   $ 381,724  
Total Revenue     323,912 $ 154,518    
Net loss attributable to ADTRAN Holdings, Inc.     (34,464) (1,127)    
Net loss attributable to non-controlling interest [1]     (5,989)      
Decrease in goodwill $ 8,700          
Network Solutions [Member]            
Business Acquisition [Line Items]            
Goodwill     301,419   298,280  
Total Revenue     282,418 138,374    
Services & Support [Member]            
Business Acquisition [Line Items]            
Goodwill     84,336   $ 83,444  
Total Revenue     41,494 16,144    
Common Stock [Member]            
Business Acquisition [Line Items]            
Percentage of common stock exchanged   64.00%        
ADVA Optical Networking SE [Member]            
Business Acquisition [Line Items]            
Business combination date of agreement   Aug. 30, 2021        
Common stock, shares outstanding | shares   33,957,538       33,957,538
Percentage of outstanding bearer shares   65.43%        
Fair value of stock options assumed   $ 12,800        
Goodwill 350,458   350,500      
Accounts receivable 114,659          
Other receivables 1,457          
Unpaid principal balance of account receivable 118,500          
Unpaid principal balance of other receivable 1,500          
Fair value of noncontrolling interest 316,415          
Total Revenue 192,300          
Net loss attributable to ADTRAN Holdings, Inc. $ 25,400          
Net loss attributable to non-controlling interest     6,000      
Shares held by noncontrolling interest | shares   17,941,496       17,941,496
Closing share price | (per share) $ 20.2 $ 17.64       € 17.58
Currency conversion rate 1.00318          
ADVA Optical Networking SE [Member] | Selling, General and Administrative Expense [Member]            
Business Acquisition [Line Items]            
Transaction costs incurred     26,100      
Transaction costs related to the business combination     $ 0 $ 1,500    
ADVA Optical Networking SE [Member] | Network Solutions [Member]            
Business Acquisition [Line Items]            
Goodwill $ 272,800          
ADVA Optical Networking SE [Member] | Services & Support [Member]            
Business Acquisition [Line Items]            
Goodwill $ 77,700          
ADVA Optical Networking SE [Member] | Common Stock [Member]            
Business Acquisition [Line Items]            
Number of shares issuable for each share of acquired entity | shares   0.8244        
Percentage of common stock exchanged   36.00%        
[1] Includes $3.2 million of net loss attributable to non-controlling interests pre-DPLTA and $2.8 million of annual recurring compensation earned by redeemable non-controlling interests and accrued by the Company post-DPLTA.
v3.23.2
Business Combination - Summary of Purchase Price for Business Combination (Details) - ADVA Optical Networking SE [Member]
$ / shares in Units, $ in Thousands
Jul. 15, 2022
USD ($)
$ / shares
shares
Aug. 30, 2021
$ / shares
Aug. 30, 2021
€ / shares
Business Acquisition [Line Items]      
ADVA shares exchanged | shares 33,957,538    
Exchange ratio 0.8244    
ADTRAN Holdings, Inc. shares issued | shares 27,994,595    
ADTRAN Holdings, Inc. share price on July 15, 2022 | (per share) $ 20.2 $ 17.64 € 17.58
Purchase price paid for ADVA shares $ 565,491    
Equity compensation 12,769    
Total purchase price $ 578,260    
v3.23.2
Business Combination - Summary of Purchase Price Allocation of Assets Acquired and Liabilities Assumed (Details) - USD ($)
$ in Thousands
Mar. 31, 2023
Dec. 31, 2022
Jul. 15, 2022
Net Assets:      
Goodwill $ 385,755 $ 381,724  
ADVA Optical Networking SE [Member]      
Business Acquisition [Line Items]      
Total purchase price     $ 578,260
Noncontrolling interest     316,415
Net Assets:      
Cash and cash equivalents     44,003
Accounts receivable     114,659
Other receivables     1,457
Inventory     200,331
Prepaid expenses and other current assets     28,208
Property plant and equipment     55,480
Deferred tax assets     1,759
Intangibles     403,780
Other non-current assets     31,074
Accounts payable     (98,587)
Current unearned revenue     (26,047)
Accrued expenses and other liabilities     (59,600)
Current portion of notes payable     (25,254)
Income tax payable, net     (4,898)
Tax liabilities     (1,400)
Non-current unearned revenue     (11,498)
Pension liability     (6,820)
Other non-current liabilities     (6,094)
Non-current portion of revolving credit agreements and notes payable     (15,250)
Non-current lease obligations     (20,046)
Deferred tax liabilities     (61,040)
Total net assets acquired     544,217
Goodwill $ 350,500   $ 350,458
v3.23.2
Business Combination - Summary of Fair Value of Intangible Assets Acquired (Details) - ADVA Optical Networking SE [Member]
$ in Thousands
Jul. 15, 2022
USD ($)
Business Acquisition [Line Items]  
Fair value $ 403,780
Cost of Revenue [Member] | Network Solutions [Member] | Developed Technology [Member]  
Business Acquisition [Line Items]  
Estimated-average useful life (in years) 8 years 6 months [1]
Fair value $ 291,925
Cost of Revenue [Member] | Network Solutions and Services & Support [Member] | Backlog [Member]  
Business Acquisition [Line Items]  
Estimated-average useful life (in years) 1 year 4 months 24 days [1]
Fair value $ 52,165
Selling, General and Administrative Expense [Member] | Customer Relationships [Member]  
Business Acquisition [Line Items]  
Estimated-average useful life (in years) 10 years 6 months [1]
Fair value $ 32,704
Selling, General and Administrative Expense [Member] | Trade Name [Member]  
Business Acquisition [Line Items]  
Estimated-average useful life (in years) 2 years 9 months 18 days [1]
Fair value $ 26,986
[1] Determination of the weighted average period of the individual categories of intangible assets was based on the nature of the applicable intangible asset and the expected future cash flows to be derived from the intangible asset. Amortization of intangible assets with definite lives is recognized over the period of time the assets are expected to contribute to future cash flows.
v3.23.2
Business Combination - Summary of Unaudited Pro Forma Financial Information (Details)
$ in Thousands
 3 Months Ended
Mar. 31, 2022
USD ($)
Business Combinations [Abstract]  
Revenue $ 345,844
Net loss $ (73,489)
v3.23.2
Cash, Cash Equivalents and Restricted Cash - Summary of Reconciliation of Cash, Cash Equivalents and Restricted Cash (Details) - USD ($)
$ in Thousands
Mar. 31, 2023
Dec. 31, 2022
Cash and Cash Equivalents [Abstract]    
Cash and cash equivalents $ 136,457 $ 108,644
v3.23.2
Revenue - Additional Information (Detail)
 3 Months Ended 12 Months Ended
Mar. 31, 2023
USD ($)
Category
Mar. 31, 2022
USD ($)
Dec. 31, 2021
USD ($)
Dec. 31, 2022
USD ($)
Revenue [Line Items]        
Number of categories | Category 3      
Accounts receivable, net $ 262,043,000     $ 279,435,000
Accounts receivable, allowance for credit losses 53,000     49,000
Allowance for credit losses related to contract assets 0 $ 0    
Contract assets [1] 1,972,000     1,852,000
Recognized revenue 25,600,000 $ 5,400,000 $ 17,700,000  
Factor [Member] | Purchase Agreement [Member]        
Revenue [Line Items]        
Accounts receivable sold 15,600,000     14,900,000
Factor [Member] | Purchase Agreement [Member] | Interest expense [Member]        
Revenue [Line Items]        
Cost of receivables 300,000      
Factor [Member] | Purchase Agreement [Member] | Maximum [Member]        
Revenue [Line Items]        
Accounts receivable, allowance for credit losses 100,000     100,000
Factor [Member] | Purchase Agreement [Member] | Other Assets [Member]        
Revenue [Line Items]        
Accounts receivable gross 1,200,000      
Contractual Maintenance Agreements, Contractual SaaS and Subscription Services and Hardware Orders [Member]        
Revenue [Line Items]        
Remaining performance obligations $ 389,000,000     $ 277,200,000
[1] Included in other receivables on the Condensed Consolidated Balance Sheets.
v3.23.2
Revenue - Disaggregate of Revenue by Reportable Segment and Revenue Category (Detail) - USD ($)
$ in Thousands
 3 Months Ended
Mar. 31, 2023
Mar. 31, 2022
Disaggregation Of Revenue [Line Items]    
Revenue $ 323,912 $ 154,518
Subscriber Solutions    
Disaggregation Of Revenue [Line Items]    
Revenue 79,336 56,722
Access & Aggregation Solutions [Member]    
Disaggregation Of Revenue [Line Items]    
Revenue 96,820 97,796
Optical Networking Solutions    
Disaggregation Of Revenue [Line Items]    
Revenue 147,756  
Network Solutions [Member]    
Disaggregation Of Revenue [Line Items]    
Revenue 282,418 138,374
Network Solutions [Member] | Subscriber Solutions    
Disaggregation Of Revenue [Line Items]    
Revenue 70,287 52,390
Network Solutions [Member] | Access & Aggregation Solutions [Member]    
Disaggregation Of Revenue [Line Items]    
Revenue 84,554 85,984
Network Solutions [Member] | Optical Networking Solutions    
Disaggregation Of Revenue [Line Items]    
Revenue 127,577  
Services & Support [Member]    
Disaggregation Of Revenue [Line Items]    
Revenue 41,494 16,144
Services & Support [Member] | Subscriber Solutions    
Disaggregation Of Revenue [Line Items]    
Revenue 9,049 4,332
Services & Support [Member] | Access & Aggregation Solutions [Member]    
Disaggregation Of Revenue [Line Items]    
Revenue 12,266 $ 11,812
Services & Support [Member] | Optical Networking Solutions    
Disaggregation Of Revenue [Line Items]    
Revenue $ 20,179  
v3.23.2
Revenue - Additional Information (Detail1) - Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date: 2023-04-01
Mar. 31, 2023
Revenue [Line Items]  
Remaining performance obligations, percentage 68.00%
Remaining performance obligations, period 12 months
v3.23.2
Revenue - Information about Receivables, Contract Assets, and Unearned Revenue from Contracts with Customers (Detail) - USD ($)
$ in Thousands
Mar. 31, 2023
Dec. 31, 2022
Revenue from Contract with Customer [Abstract]    
Accounts receivable, net $ 262,043 $ 279,435
Contract assets [1] 1,972 1,852
Unearned revenue 55,611 41,193
Non-current unearned revenue $ 24,907 $ 19,239
[1] Included in other receivables on the Condensed Consolidated Balance Sheets.
v3.23.2
Income Taxes - Additional Information (Detail) - USD ($)
$ in Thousands
 3 Months Ended
Mar. 31, 2023
Mar. 31, 2022
Dec. 31, 2022
Income Tax Disclosure [Line Items]      
Effective tax rate benefit 21.90% 68.10%  
Deferred tax assets $ 34,982   $ 11,411
Valuation allowance established against deferred tax assets 5,201   5,201
Net deferred tax assets 29,800    
Domestic [Member]      
Income Tax Disclosure [Line Items]      
Deferred tax assets 75,432   61,726
Valuation allowance established against deferred tax assets 3,177   3,177
Net deferred tax assets 72,255   58,549
International [Member]      
Income Tax Disclosure [Line Items]      
Valuation allowance established against deferred tax assets $ 2,024   $ 2,024
v3.23.2
Income Taxes - Summary of Supplemental Balance Sheet Information Related to Deferred Tax Assets (Liabilities) (Detail) - USD ($)
$ in Thousands
Mar. 31, 2023
Dec. 31, 2022
Operating Loss Carryforwards [Line Items]    
Deferred Tax Assets $ 34,982 $ 11,411
Valuation Allowance (5,201) (5,201)
Deferred Tax Assets, net 29,800  
Net Deferred Tax Assets (Liabilities) 29,781 6,210
Domestic [Member]    
Operating Loss Carryforwards [Line Items]    
Deferred Tax Assets 75,432 61,726
Valuation Allowance (3,177) (3,177)
Deferred Tax Assets, net 72,255 58,549
International [Member]    
Operating Loss Carryforwards [Line Items]    
Deferred Tax Liabilities (40,450) (50,315)
Valuation Allowance (2,024) (2,024)
Deferred Tax Liabilities, net $ (42,474) $ (52,339)
v3.23.2
Stock-Based Compensation - Stock-Based Compensation Expense Related to Stock Options, RSUs and Restricted Stock (Detail)
shares in Thousands
 3 Months Ended
Mar. 31, 2023
$ / shares
shares
Share-Based Payment Arrangement [Abstract]  
Number of Shares, Unvested RSUs and restricted stock outstanding, beginning balance | shares 1,086
Number of Shares, RSUs and restricted stock granted | shares 1,296
Number of Shares, RSUs and restricted stock vested | shares (12)
Number of Shares, RSUs and restricted stock forfeited | shares (10)
Number of Shares, Unvested RSUs and restricted stock outstanding, ending balance | shares 2,360
Weighted Avg. Grant Date Fair Value, Unvested RSUs and restricted stock outstanding, Beginning Balance | $ / shares $ 17.54
Weighted Avg. Grant Date Fair Value, RSUs and restricted stock granted | $ / shares 17.6
Weighted Avg. Grant Date Fair Value, RSUs and restricted stock vested | $ / shares 20.51
Weighted Avg. Grant Date Fair Value, RSUs and restricted stock forfeited | $ / shares 15.32
Weighted Avg. Grant Date Fair Value, Unvested RSUs and restricted stock outstanding, Ending Balance | $ / shares $ 17.65
v3.23.2
Stock-Based Compensation (PSUs, RSUs and Restricted Stock) - Additional Information (Detail)
shares in Thousands, $ in Millions
 3 Months Ended
Mar. 31, 2023
USD ($)
shares
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]  
Share granted 1,296
Recognition period of unvested compensation expense 2 years 2 months 12 days
Options available for issuance under stockholders-approved equity plan 2,000
Maximum [Member]  
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]  
Options available for issuance under stockholders-approved equity plan 2,300
Performance Stock Units (PSUs) [Member] | Executive Officers and Certain Employees [Member]  
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]  
Share granted 700
Vesting period 3 years
Performance Stock Units (PSUs) [Member] | Executive Officers [Member]  
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]  
Share granted 100
Vesting period 2 years
Performance Stock Units (PSUs) [Member] | Minimum [Member] | Executive Officers and Certain Employees [Member]  
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]  
Percentage of performance stock units granted 0.00%
Performance Stock Units (PSUs) [Member] | Minimum [Member] | Executive Officers [Member]  
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]  
Percentage of performance stock units granted 0.00%
Performance Stock Units (PSUs) [Member] | Maximum [Member] | Executive Officers and Certain Employees [Member]  
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]  
Percentage of performance stock units granted 150.00%
Performance Stock Units (PSUs) [Member] | Maximum [Member] | Executive Officers [Member]  
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]  
Percentage of performance stock units granted 100.00%
Market-Based PSUs, RSUs and Restricted Stock [Member]  
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]  
Unrecognized compensation expense related to other than options | $ $ 24.6
Recognition period of unvested compensation expense 2 years 7 months 6 days
Restricted Stock Units (RSUs) [Member]  
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]  
Unrecognized compensation expense related to other than options | $ $ 11.9
v3.23.2
Stock-Based Compensation - Summary of Stock Options Outstanding (Detail) - USD ($)
$ / shares in Units, shares in Thousands, $ in Thousands
 3 Months Ended 12 Months Ended
Mar. 31, 2023
Dec. 31, 2022
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]    
Number of Stock Options, Stock options outstanding, Beginning Balance 3,148  
Number of Stock Options, Stock options exercised (6)  
Number of Stock Options, Stock options forfeited (21)  
Number of Stock Options, Stock options expired (7)  
Number of Stock Options, Stock options outstanding, Ending Balance 3,114 3,148
Number of Stock Options, Stock options exercisable 1,698  
Weighted Avg. Exercise Price, Stock options outstanding, Beginning Balance $ 14.37  
Weighted Avg. Exercise Price, Stock options exercised 9.82  
Weighted Avg. Exercise Price, Stock options forfeited 12.21  
Weighted Avg. Exercise Price, Stock options expired 19  
Weighted Avg. Exercise Price, Stock options outstanding, Ending Balance 14.38 $ 14.37
Weighted Avg. Exercise Price, Stock options exercisable $ 15.96  
Weighted Avg. Remaining Contractual Life In Years, Stock options outstanding 3 years 2 months 1 day 3 years 5 months 1 day
Weighted Avg. Remaining Contractual Life in Years, Stock options exercisable 1 year 8 months 12 days  
Aggregate Intrinsic Value, Stock options outstanding $ 16,251  
Aggregate Intrinsic Value, Stock options outstanding 10,198 $ 16,251
Aggregate Intrinsic Value, Stock options exercisable $ 4,436  
ADVA Optical Networking SE [Member]    
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]    
Number of Stock Options, Stock options outstanding, Beginning Balance 81  
Number of Stock Options, Stock options outstanding, Ending Balance 81 81
Number of Stock Options, Stock options exercisable 27  
Weighted Avg. Exercise Price, Stock options outstanding, Beginning Balance $ 8.58  
Weighted Avg. Exercise Price, Stock options outstanding, Ending Balance 8.67 $ 8.58
Weighted Avg. Exercise Price, Stock options exercisable $ 7.45  
Weighted Avg. Remaining Contractual Life In Years, Stock options outstanding 3 years 9 months 4 years
Weighted Avg. Remaining Contractual Life in Years, Stock options exercisable 2 years 1 month 20 days  
Aggregate Intrinsic Value, Stock options outstanding $ 1,222  
Aggregate Intrinsic Value, Stock options outstanding 1,198 $ 1,222
Aggregate Intrinsic Value, Stock options exercisable $ 424  
v3.23.2
Stock-Based Compensation (Stock Options) - Additional Information (Detail) - USD ($)
$ in Thousands, shares in Millions
 3 Months Ended
Mar. 31, 2023
Mar. 31, 2022
Dec. 31, 2022
Jul. 22, 2022
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]        
Stock-based compensation expense $ 2,600 $ 1,900    
Unrecognized compensation expense related to stock options $ 7,300      
Recognition period of unvested compensation expense 2 years 2 months 12 days      
Options available for issuance under stockholders-approved equity plan 2.0      
Aggregate intrinsic value based on fair market value $ 10,198   $ 16,251  
Total pre-tax intrinsic value of options exercised $ 43      
Maximum [Member]        
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]        
Options available for issuance under stockholders-approved equity plan 2.3      
ADVA Optical Networking SE [Member]        
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]        
Unrecognized compensation expense related to stock options $ 100      
Recognition period of unvested compensation expense 3 years 9 months 18 days      
Options available for issuance under stockholders-approved equity plan       2.1
Aggregate intrinsic value based on fair market value $ 1,198   $ 1,222  
v3.23.2
Investments - Debt Securities and Other Investments, Included on Condensed Consolidated Balance Sheet and Recorded at Fair Value (Detail) - USD ($)
$ in Thousands
Mar. 31, 2023
Dec. 31, 2022
Schedule of Available-for-sale Securities [Line Items]    
Amortized Cost $ 9,541 $ 9,671
Gross Unrealized Gains 11 9
Gross Unrealized Losses (339) (427)
Fair Value 9,213 9,253
Corporate Bonds [Member]    
Schedule of Available-for-sale Securities [Line Items]    
Amortized Cost 2,218 2,538
Gross Unrealized Gains 4 5
Gross Unrealized Losses (63) (81)
Fair Value 2,159 2,462
Municipal Fixed-Rate Bonds [Member]    
Schedule of Available-for-sale Securities [Line Items]    
Amortized Cost 185 185
Gross Unrealized Losses (4) (5)
Fair Value 181 180
Asset-Backed Bonds [Member]    
Schedule of Available-for-sale Securities [Line Items]    
Amortized Cost 734 818
Gross Unrealized Gains 1 1
Gross Unrealized Losses (20) (24)
Fair Value 715 795
Mortgage/Agency-Backed Bonds [Member]    
Schedule of Available-for-sale Securities [Line Items]    
Amortized Cost 1,699 1,853
Gross Unrealized Gains 1  
Gross Unrealized Losses (82) (105)
Fair Value 1,618 1,748
U.S. Government Bonds [Member]    
Schedule of Available-for-sale Securities [Line Items]    
Amortized Cost 4,299 3,870
Gross Unrealized Gains 5 3
Gross Unrealized Losses (151) (188)
Fair Value 4,153 3,685
Foreign Government Bonds [Member]    
Schedule of Available-for-sale Securities [Line Items]    
Amortized Cost 406 407
Gross Unrealized Losses (19) (24)
Fair Value $ 387 $ 383
v3.23.2
Investments - Contractual Maturities of Debt Securities and Other Investments (Detail) - USD ($)
$ in Thousands
Mar. 31, 2023
Dec. 31, 2022
Schedule of Available-for-sale Securities [Line Items]    
Available-for-sale debt securities, Fair Value/Carrying Value $ 9,213 $ 9,253
Corporate Bonds [Member]    
Schedule of Available-for-sale Securities [Line Items]    
Less than one year 369  
One to two years 966  
Two to three years 824  
Available-for-sale debt securities, Fair Value/Carrying Value 2,159 2,462
Municipal Fixed-Rate Bonds [Member]    
Schedule of Available-for-sale Securities [Line Items]    
Less than one year 181  
Available-for-sale debt securities, Fair Value/Carrying Value 181 180
Asset-Backed Bonds [Member]    
Schedule of Available-for-sale Securities [Line Items]    
One to two years 169  
Two to three years 49  
Three to five years 337  
More than ten years 160  
Available-for-sale debt securities, Fair Value/Carrying Value 715 795
Mortgage/Agency-Backed Bonds [Member]    
Schedule of Available-for-sale Securities [Line Items]    
One to two years 166  
Two to three years 600  
Three to five years 242  
Five to ten years 238  
More than ten years 372  
Available-for-sale debt securities, Fair Value/Carrying Value 1,618 1,748
U.S. Government Bonds [Member]    
Schedule of Available-for-sale Securities [Line Items]    
Less than one year 508  
One to two years 3,174  
Two to three years 348  
Three to five years 123  
Available-for-sale debt securities, Fair Value/Carrying Value 4,153 3,685
Foreign Government Bonds [Member]    
Schedule of Available-for-sale Securities [Line Items]    
One to two years 387  
Available-for-sale debt securities, Fair Value/Carrying Value $ 387 $ 383
v3.23.2
Investments - Gross Realized Gains and Losses on Sale of Debt Securities (Detail) - USD ($)
$ in Thousands
 3 Months Ended
Mar. 31, 2023
Mar. 31, 2022
Investments, Debt and Equity Securities [Abstract]    
Gross realized gain on debt securities $ 4 $ 12
Gross realized loss on debt securities (11) (40)
Total (loss) gain recognized, net $ 7 $ (28)
v3.23.2
Investments - Additional Information (Detail) - USD ($)
 3 Months Ended
Mar. 31, 2023
Mar. 31, 2022
Dec. 31, 2022
Schedule of Investments [Line Items]      
Available-for-sale debt securities, allowance for credit losses $ 0   $ 0
Purchase an available-for-sale debt securities with credit deterioration 0    
Asset impairments $ 0 $ 0  
Investment [Member] | Issuer Concentration [Member] | Market Value of Total Investment Portfolio [Member]      
Schedule of Investments [Line Items]      
Investment concentration risk percentage 5.00%    
v3.23.2
Investments - Realized and Unrealized Gains and Losses related to Marketable Equity Securities (Detail) - USD ($)
$ in Thousands
 3 Months Ended
Mar. 31, 2023
Mar. 31, 2022
Investments, Debt and Equity Securities [Abstract]    
Realized (loss) gain on equity securities sold $ 13 $ (25)
Unrealized (loss) gain on equity securities held 1,246 (3,362)
Total (loss) gain recognized, net $ 1,259 $ (3,387)
v3.23.2
Investments - Cash Equivalents and Investments held at Fair Value (Detail) - USD ($)
$ in Thousands
Mar. 31, 2023
Dec. 31, 2022
Schedule of Available-for-sale Securities [Line Items]    
Available-for-sale debt securities $ 9,213 $ 9,253
Fair Value, Measurements [Member]    
Schedule of Available-for-sale Securities [Line Items]    
Total 34,465 33,227
Fair Value, Measurements [Member] | Quoted Prices in Active Market for Identical Assets (Level 1) [Member]    
Schedule of Available-for-sale Securities [Line Items]    
Total 29,405 27,659
Fair Value, Measurements [Member] | Significant Other Observable Inputs (Level 2) [Member]    
Schedule of Available-for-sale Securities [Line Items]    
Total 5,060 5,568
Money Market Funds [Member] | Fair Value, Measurements [Member]    
Schedule of Available-for-sale Securities [Line Items]    
Cash equivalents 243 228
Money Market Funds [Member] | Fair Value, Measurements [Member] | Quoted Prices in Active Market for Identical Assets (Level 1) [Member]    
Schedule of Available-for-sale Securities [Line Items]    
Cash equivalents 243 228
Corporate Bonds [Member]    
Schedule of Available-for-sale Securities [Line Items]    
Available-for-sale debt securities 2,159 2,462
Corporate Bonds [Member] | Fair Value, Measurements [Member]    
Schedule of Available-for-sale Securities [Line Items]    
Available-for-sale debt securities 2,159 2,462
Corporate Bonds [Member] | Fair Value, Measurements [Member] | Significant Other Observable Inputs (Level 2) [Member]    
Schedule of Available-for-sale Securities [Line Items]    
Available-for-sale debt securities 2,159 2,462
Municipal Fixed-Rate Bonds [Member]    
Schedule of Available-for-sale Securities [Line Items]    
Available-for-sale debt securities 181 180
Municipal Fixed-Rate Bonds [Member] | Fair Value, Measurements [Member]    
Schedule of Available-for-sale Securities [Line Items]    
Available-for-sale debt securities 181 180
Municipal Fixed-Rate Bonds [Member] | Fair Value, Measurements [Member] | Significant Other Observable Inputs (Level 2) [Member]    
Schedule of Available-for-sale Securities [Line Items]    
Available-for-sale debt securities 181 180
Asset-Backed Bonds [Member]    
Schedule of Available-for-sale Securities [Line Items]    
Available-for-sale debt securities 715 795
Asset-Backed Bonds [Member] | Fair Value, Measurements [Member]    
Schedule of Available-for-sale Securities [Line Items]    
Available-for-sale debt securities 715 795
Asset-Backed Bonds [Member] | Fair Value, Measurements [Member] | Significant Other Observable Inputs (Level 2) [Member]    
Schedule of Available-for-sale Securities [Line Items]    
Available-for-sale debt securities 715 795
Mortgage/Agency-Backed Bonds [Member]    
Schedule of Available-for-sale Securities [Line Items]    
Available-for-sale debt securities 1,618 1,748
Mortgage/Agency-Backed Bonds [Member] | Fair Value, Measurements [Member]    
Schedule of Available-for-sale Securities [Line Items]    
Available-for-sale debt securities 1,618 1,748
Mortgage/Agency-Backed Bonds [Member] | Fair Value, Measurements [Member] | Significant Other Observable Inputs (Level 2) [Member]    
Schedule of Available-for-sale Securities [Line Items]    
Available-for-sale debt securities 1,618 1,748
U.S. Government Bonds [Member]    
Schedule of Available-for-sale Securities [Line Items]    
Available-for-sale debt securities 4,153 3,685
U.S. Government Bonds [Member] | Fair Value, Measurements [Member]    
Schedule of Available-for-sale Securities [Line Items]    
Cash equivalents 175  
Available-for-sale debt securities 4,153 3,685
U.S. Government Bonds [Member] | Fair Value, Measurements [Member] | Quoted Prices in Active Market for Identical Assets (Level 1) [Member]    
Schedule of Available-for-sale Securities [Line Items]    
Cash equivalents 175  
Available-for-sale debt securities 4,153 3,685
Foreign Government Securities / Bonds [Member]    
Schedule of Available-for-sale Securities [Line Items]    
Available-for-sale debt securities 387 383
Foreign Government Securities / Bonds [Member] | Fair Value, Measurements [Member]    
Schedule of Available-for-sale Securities [Line Items]    
Available-for-sale debt securities 387 383
Foreign Government Securities / Bonds [Member] | Fair Value, Measurements [Member] | Significant Other Observable Inputs (Level 2) [Member]    
Schedule of Available-for-sale Securities [Line Items]    
Available-for-sale debt securities 387 383
Marketable Equity Securities - Various Industries [Member] | Fair Value, Measurements [Member]    
Schedule of Available-for-sale Securities [Line Items]    
Marketable equity securities 821 804
Marketable Equity Securities - Various Industries [Member] | Fair Value, Measurements [Member] | Quoted Prices in Active Market for Identical Assets (Level 1) [Member]    
Schedule of Available-for-sale Securities [Line Items]    
Marketable equity securities 821 804
Deferred Compensation Plan Assets [Member] | Fair Value, Measurements [Member]    
Schedule of Available-for-sale Securities [Line Items]    
Marketable equity securities 24,013 22,942
Deferred Compensation Plan Assets [Member] | Fair Value, Measurements [Member] | Quoted Prices in Active Market for Identical Assets (Level 1) [Member]    
Schedule of Available-for-sale Securities [Line Items]    
Marketable equity securities $ 24,013 $ 22,942
v3.23.2
Inventory - Components of Inventory (Detail) - USD ($)
$ in Thousands
Mar. 31, 2023
Dec. 31, 2022
Inventory Disclosure [Abstract]    
Raw materials $ 167,086 $ 186,346
Work in process 7,383 12,087
Finished goods 241,822 229,098
Total Inventory, net $ 416,291 $ 427,531
v3.23.2
Inventory - Additional Information (Detail) - USD ($)
$ in Millions
Mar. 31, 2023
Dec. 31, 2022
Inventory Disclosure [Abstract]    
Inventory valuation reserves $ 73.3 $ 57.0
v3.23.2
Property, Plant and Equipment - Property, Plant and Equipment (Detail) - USD ($)
$ in Thousands
Mar. 31, 2023
Dec. 31, 2022
Property, Plant and Equipment [Abstract]    
Engineering and other equipment $ 173,968 $ 170,785
Building 83,287 82,932
Computer hardware and software 82,682 80,455
Building and land improvements 51,081 47,861
Furniture and fixtures 23,525 22,403
Land 5,367 5,364
Total property, plant and equipment 419,910 409,800
Less: accumulated depreciation (307,941) (299,101)
Total property, plant and equipment, net $ 111,969 $ 110,699
v3.23.2
Property, Plant and Equipment - Additional Information (Detail) - USD ($)
 3 Months Ended
Mar. 31, 2023
Mar. 31, 2022
Property, Plant and Equipment [Line Items]    
Asset impairments $ 0 $ 0
Depreciation expense $ 7,600,000 $ 2,800,000
v3.23.2
Goodwill - Summary of Changes in Carrying Amount of Goodwill (Detail)
$ in Thousands
 3 Months Ended
Mar. 31, 2023
USD ($)
Goodwill [Line Items]  
Goodwill, Beginning balance $ 381,724
Foreign currency translation adjustments 4,031
Goodwill, Ending balance 385,755
Network Solutions [Member]  
Goodwill [Line Items]  
Goodwill, Beginning balance 298,280
Foreign currency translation adjustments 3,139
Goodwill, Ending balance 301,419
Services & Support [Member]  
Goodwill [Line Items]  
Goodwill, Beginning balance 83,444
Foreign currency translation adjustments 892
Goodwill, Ending balance $ 84,336
v3.23.2
Goodwill - Additional Information (Detail) - USD ($)
 3 Months Ended
Mar. 31, 2023
Mar. 31, 2022
Dec. 31, 2022
Jul. 15, 2022
Goodwill [Line Items]        
Goodwill $ 385,755,000   $ 381,724,000  
Impairment of goodwill $ 0 $ 0    
ADVA        
Goodwill [Line Items]        
Goodwill       $ 350,500,000
v3.23.2
Intangible Assets - Summary of Intangible Assets (Detail) - USD ($)
$ in Thousands
Mar. 31, 2023
Dec. 31, 2022
Finite Lived Intangible Assets [Line Items]    
Gross Carrying Amount $ 470,335 $ 467,689
Accumulated Amortization (91,049) (66,478)
Net Book Value $ 379,286 401,211
Customer Relationships [Member]    
Finite Lived Intangible Assets [Line Items]    
Weighted Average Useful Life (in years) 10 years 10 months 24 days  
Gross Carrying Amount $ 54,103 55,517
Accumulated Amortization (12,180) (12,772)
Net Book Value $ 41,923 42,745
Backlog [Member]    
Finite Lived Intangible Assets [Line Items]    
Weighted Average Useful Life (in years) 1 year 7 months 6 days  
Gross Carrying Amount $ 56,382 55,782
Accumulated Amortization (35,348) (22,725)
Net Book Value $ 21,034 33,057
Developed Technology [Member]    
Finite Lived Intangible Assets [Line Items]    
Weighted Average Useful Life (in years) 8 years 6 months  
Gross Carrying Amount $ 323,723 320,364
Accumulated Amortization (31,604) (21,856)
Net Book Value $ 292,119 298,508
Licensed Technology [Member]    
Finite Lived Intangible Assets [Line Items]    
Weighted Average Useful Life (in years) 9 years  
Gross Carrying Amount $ 5,900 5,900
Accumulated Amortization (3,305) (3,141)
Net Book Value $ 2,595 2,759
Licensing Agreements [Member]    
Finite Lived Intangible Assets [Line Items]    
Weighted Average Useful Life (in years) 8 years 6 months  
Gross Carrying Amount $ 560 560
Accumulated Amortization (316) (298)
Net Book Value $ 244 262
Patent [Member]    
Finite Lived Intangible Assets [Line Items]    
Weighted Average Useful Life (in years) 7 years 3 months 18 days  
Gross Carrying Amount $ 500 500
Accumulated Amortization (449) (431)
Net Book Value $ 51 69
Trade Names [Member]    
Finite Lived Intangible Assets [Line Items]    
Weighted Average Useful Life (in years) 3 years  
Gross Carrying Amount $ 29,167 29,066
Accumulated Amortization (7,847) (5,255)
Net Book Value $ 21,320 $ 23,811
v3.23.2
Intangible Assets - Additional Information (Detail) - USD ($)
 3 Months Ended
Mar. 31, 2023
Mar. 31, 2022
Acquired Finite-Lived Intangible Assets [Line Items]    
Impairment losses of intangible assets $ 0 $ 0
Amortization expense $ 25,800,000 $ 900,000
v3.23.2
Intangible Assets - Estimated Future Amortization Expense Related to Intangible Assets (Detail) - USD ($)
$ in Thousands
Mar. 31, 2023
Dec. 31, 2022
Finite-Lived Intangible Assets, Net, Amortization Expense, Fiscal Year Maturity [Abstract]    
2023 $ 56,855  
2024 58,129  
2025 46,558  
2026 43,292  
2027 41,922  
Thereafter 132,530  
Net Book Value $ 379,286 $ 401,211
v3.23.2
Hedging - Additional Information (Detail)
$ in Millions
 3 Months Ended
Mar. 31, 2023
USD ($)
ForwardContracts
Mar. 21, 2023
USD ($)
Nov. 03, 2022
USD ($)
Foreign Exchange Forward [Member]      
Derivative Instruments and Hedging Activities Disclosures [Line Items]      
Number of forward rate contracts outstanding | ForwardContracts 53    
Cross-Currency Swap Arrangement [Member]      
Derivative Instruments and Hedging Activities Disclosures [Line Items]      
Aggregate notional amount   $ 160.0 $ 160.0
Forward contract tranche settled on hedge $ 20.0    
Cross-Currency Swap Arrangement [Member] | Eight Quarterly Tranches [Member]      
Derivative Instruments and Hedging Activities Disclosures [Line Items]      
Aggregate notional amount     $ 20.0
Cross-Currency Swap Arrangement [Member] | Seven Quarterly Tranches [Member]      
Derivative Instruments and Hedging Activities Disclosures [Line Items]      
Aggregate notional amount   $ 20.0  
Cross-Currency Swap Arrangement [Member] | Minimum [Member]      
Derivative Instruments and Hedging Activities Disclosures [Line Items]      
Aggregate notional amount, daily fixed forward conversion rate   1.085 0.98286
Cross-Currency Swap Arrangement [Member] | Maximum [Member]      
Derivative Instruments and Hedging Activities Disclosures [Line Items]      
Aggregate notional amount, daily fixed forward conversion rate   1 1.0329
v3.23.2
Hedging - Schedule of Fair Values of Derivative Instruments (Detail) - Derivatives Not Designated as Hedging Instruments [Member] - USD ($)
$ in Thousands
 3 Months Ended
Mar. 31, 2023
Dec. 31, 2022
Other income (expense), net [Member]    
Derivative Instruments Not Designated as Hedging Instruments [Abstract]    
Foreign exchange contracts $ (69)  
Level 2 [Member]    
Derivative Instruments Not Designated as Hedging Instruments [Abstract]    
Total derivatives 11,480 $ 11,359
Level 2 [Member] | Other Receivables [Member]    
Derivative Instruments Not Designated as Hedging Instruments [Abstract]    
Foreign exchange contracts - derivative assets 11,831 11,992
Level 2 [Member] | Accounts Payable [Member]    
Derivative Instruments Not Designated as Hedging Instruments [Abstract]    
Foreign exchange contracts - derivative liabilities $ (351) $ (633)
v3.23.2
Revolving Credit Agreements - Carrying Amount Current and Non-current of Revolving Agreements (Details) - USD ($)
$ in Thousands
Mar. 31, 2023
Dec. 31, 2022
Line of Credit Facility [Line Items]    
Current revolving credit agreements $ 10,843 $ 35,936
Non-current revolving credit agreement 180,000 60,000
Wells Fargo Credit Agreement [Member]    
Line of Credit Facility [Line Items]    
Non-current revolving credit agreement 180,000  
New Nord/LB Revolving Line of Credit [Member]    
Line of Credit Facility [Line Items]    
Current revolving credit agreements $ 10,843  
Nord/LB Revolving Line of Credit [Member]    
Line of Credit Facility [Line Items]    
Current revolving credit agreements   16,091
Syndicated Credit Agreement Working Capital Line of Credit [Member]    
Line of Credit Facility [Line Items]    
Current revolving credit agreements   10,727
DZ Bank Revolving Line of Credit [Member]    
Line of Credit Facility [Line Items]    
Current revolving credit agreements   $ 9,118
v3.23.2
Revolving Credit Agreements - Additional Information (Detail)
 1 Months Ended 3 Months Ended
Mar. 29, 2023
USD ($)
Aug. 08, 2022
USD ($)
Aug. 05, 2022
Dec. 31, 2024
Sep. 30, 2024
Mar. 31, 2023
USD ($)
Dec. 31, 2022
USD ($)
Jul. 18, 2022
USD ($)
Sep. 30, 2018
USD ($)
Line Of Credit Facility [Line Items]                  
Weighted average interest rate           6.20%      
Debt instrument default interest rate percentage           2.00%      
Daily Simple SOFR [Member]                  
Line Of Credit Facility [Line Items]                  
Credit facility, floor rate           0.00%      
EURIBOR [Member]                  
Line Of Credit Facility [Line Items]                  
Credit facility, floor rate           0.00%      
Maximum [Member] | Daily Simple SOFR [Member]                  
Line Of Credit Facility [Line Items]                  
Applicable margin rate           2.15%      
Maximum [Member] | Base Rate [Member]                  
Line Of Credit Facility [Line Items]                  
Applicable margin rate           1.25%      
Maximum [Member] | EURIBOR [Member]                  
Line Of Credit Facility [Line Items]                  
Applicable margin rate           2.25%      
Minimum [Member] | Daily Simple SOFR [Member]                  
Line Of Credit Facility [Line Items]                  
Applicable margin rate           1.40%      
Minimum [Member] | Base Rate [Member]                  
Line Of Credit Facility [Line Items]                  
Applicable margin rate           0.50%      
Minimum [Member] | EURIBOR [Member]                  
Line Of Credit Facility [Line Items]                  
Applicable margin rate           1.50%      
Wells Fargo Credit Agreement [Member]                  
Line Of Credit Facility [Line Items]                  
Commitment fee percentage           0.25%      
Net leverage ratio     3            
Wells Fargo Credit Agreement [Member] | Daily Simple SOFR [Member]                  
Line Of Credit Facility [Line Items]                  
Applicable margin rate           1.00%      
Wells Fargo Credit Agreement [Member] | Federal Reserve Bank Advances [Member]                  
Line Of Credit Facility [Line Items]                  
Applicable margin rate           1.00%      
New Nord/LB Revolving Line of Credit [Member]                  
Line Of Credit Facility [Line Items]                  
Revolving line of credit $ 16,100,000         $ 10,800,000      
New Nord/LB Revolving Line of Credit [Member] | Euro Short Term Rate [Member]                  
Line Of Credit Facility [Line Items]                  
Applicable margin rate 1.94%                
Nord/LB Revolving Line of Credit [Member]                  
Line Of Credit Facility [Line Items]                  
Revolving line of credit   $ 16,100,000              
Available for future borrowings   $ 0              
Line of credit maturity period month and year   2023-08              
Nord/LB Revolving Line of Credit [Member] | Euro Short Term Rate [Member]                  
Line Of Credit Facility [Line Items]                  
Applicable margin rate   1.40%              
Syndicated Credit Agreement Working Capital Line of Credit [Member]                  
Line Of Credit Facility [Line Items]                  
Available for future borrowings                 $ 0
DZ Bank Revolving Line Of Credit [Member]                  
Line Of Credit Facility [Line Items]                  
Revolving line of credit             $ 9,100,000    
Available for future borrowings             $ 0    
Interest rate             2.80%    
Acorn HoldCo, Inc., [Member] | Wells Fargo Credit Agreement [Member]                  
Line Of Credit Facility [Line Items]                  
Secured revolving credit facility amount           400,000,000   $ 100,000,000  
Revolving line of credit           180,000,000      
Credit facility, average outstanding amount           3,400,000      
Letters of credit may be issued           25,000,000      
Available for future borrowings           216,600,000      
Acorn HoldCo, Inc., [Member] | Wells Fargo Credit Agreement [Member] | Maximum [Member]                  
Line Of Credit Facility [Line Items]                  
Credit agreement current borrowing capacity           $ 400,000,000      
Bayerische Landesbank and Deutsche Bank [Member] | Syndicated Credit Agreement Working Capital Line of Credit [Member]                  
Line Of Credit Facility [Line Items]                  
Secured revolving credit facility amount                 $ 10,700,000
Scenario Forecast [Member] | Wells Fargo Credit Agreement [Member]                  
Line Of Credit Facility [Line Items]                  
Net leverage ratio       2.75 3.25        
v3.23.2
Notes Payable - Carrying Amounts of Note Payables (Details)
$ in Thousands
Dec. 31, 2022
USD ($)
Debt Instrument [Line Items]  
Carrying Value $ 24,598
Syndicated Credit Agreement Notes Payable [Member]  
Debt Instrument [Line Items]  
Carrying Value $ 24,598
v3.23.2
Notes Payable - Additional Information (Details) - Syndicated Credit Agreement Notes Payable [Member] - USD ($)
Jan. 31, 2023
Sep. 30, 2018
Debt Instrument [Line Items]    
Available for future borrowings $ 0  
Bayerische Landesbank and Deutsche Bank [Member]    
Debt Instrument [Line Items]    
Notes payable borrowings   $ 63,700,000
v3.23.2
Employee Benefit Plans - Additional Information (Details) - USD ($)
$ in Thousands
 3 Months Ended
Mar. 31, 2023
Mar. 31, 2022
Dec. 31, 2022
Defined Benefit Plan Disclosure [Line Items]      
Pension liability $ 10,698   $ 10,624
Contributions to defined benefit pension plans 1,000 $ 500  
Defined benefit pension plans for the remainder of fiscal year 3,300    
Pension Plan [Member]      
Defined Benefit Plan Disclosure [Line Items]      
Business combination, acquired additional obligation 29,600    
Business combination, acquired assets $ 22,300    
v3.23.2
Employee Benefit Plans - Schedule of the Components of Net Periodic Pension Cost (Details) - USD ($)
$ in Thousands
 3 Months Ended
Mar. 31, 2023
Mar. 31, 2022
Defined Benefit Plan, Net Periodic Benefit Cost (Credit) [Abstract]    
Service cost $ 398 $ 257
Interest cost $ 32 $ 222
Defined Benefit Plan, Net Periodic Benefit Cost (Credit), Interest Cost, Statement of Income or Comprehensive Income [Extensible Enumeration] Other Nonoperating Income (Expense) Other Nonoperating Income (Expense)
Expected return on plan assets $ (58) $ (470)
Defined Benefit Plan, Net Periodic Benefit (Cost) Credit, Expected Return (Loss), Statement of Income or Comprehensive Income [Extensible Enumeration] Other Nonoperating Income (Expense) Other Nonoperating Income (Expense)
Amortization of actuarial losses $ 6 $ 89
Defined Benefit Plan, Net Periodic Benefit (Cost) Credit, Amortization of Gain (Loss), Statement of Income or Comprehensive Income [Extensible Enumeration] Other Nonoperating Income (Expense) Other Nonoperating Income (Expense)
Net periodic benefit cost $ 430 $ 98
v3.23.2
Equity - Changes in Accumulated Other Comprehensive Income (Loss), Net of Tax, by Component (Detail) - USD ($)
$ in Thousands
 3 Months Ended
Mar. 31, 2023
Mar. 31, 2022
Accumulated Other Comprehensive Income (Loss) [Line Items]    
Beginning Balance $ 1,303,613 $ 357,102
Other comprehensive income (loss) before reclassifications 8,761 (1,880)
Amounts reclassified from accumulated other comprehensive (loss) income 21 238
Net current period other comprehensive income (loss) 8,782 (1,642)
Less: Comprehensive Income attributable to non-controlling interest, net of tax 244  
Ending Balance 820,162 352,316
ASU 2018-02 [Member]    
Accumulated Other Comprehensive Income (Loss) [Line Items]    
Beginning Balance 385 385
Ending Balance 385 385
Accumulated Other Comprehensive Income (Loss) [Member]    
Accumulated Other Comprehensive Income (Loss) [Line Items]    
Beginning Balance 46,713 (11,914)
Ending Balance 55,251 (13,556)
Unrealized Gains (Losses) on Available-for-Sale Securities [Member]    
Accumulated Other Comprehensive Income (Loss) [Line Items]    
Beginning Balance (836) (552)
Other comprehensive income (loss) before reclassifications 83 (975)
Amounts reclassified from accumulated other comprehensive (loss) income (14) 251
Net current period other comprehensive income (loss) 69 (724)
Ending Balance (767) (1,276)
Defined Benefit Plan Adjustments [Member]    
Accumulated Other Comprehensive Income (Loss) [Line Items]    
Beginning Balance (1,016) (5,613)
Amounts reclassified from accumulated other comprehensive (loss) income 35 (13)
Net current period other comprehensive income (loss) 35 (13)
Ending Balance (981) (5,626)
Foreign Currency Adjustments [Member]    
Accumulated Other Comprehensive Income (Loss) [Line Items]    
Beginning Balance 48,180 (6,134)
Other comprehensive income (loss) before reclassifications 8,678 (905)
Net current period other comprehensive income (loss) 8,678 (905)
Less: Comprehensive Income attributable to non-controlling interest, net of tax 244  
Ending Balance $ 56,614 $ (7,039)
v3.23.2
Equity - Reclassifications Out of Accumulated Other Comprehensive Loss (Detail) - USD ($)
$ in Thousands
 3 Months Ended
Mar. 31, 2023
Mar. 31, 2022
Reclassification Adjustment Out of Accumulated Other Comprehensive Income (Loss) [Line Items]    
Loss Before Income Taxes $ (51,766) $ (3,535)
Tax benefit 11,313 2,408
Net Loss attributable to ADTRAN Holdings, Inc. (34,464) (1,127)
Reclassification Out of Accumulated Other Comprehensive Income (Loss) [Member]    
Reclassification Adjustment Out of Accumulated Other Comprehensive Income (Loss) [Line Items]    
Loss Before Income Taxes (33) (311)
Tax benefit 12 73
Net Loss attributable to ADTRAN Holdings, Inc. (21) (238)
Reclassification Out of Accumulated Other Comprehensive Income (Loss) [Member] | Unrealized Gains (Losses) on Available-for-Sale Securities [Member]    
Reclassification Adjustment Out of Accumulated Other Comprehensive Income (Loss) [Line Items]    
Net investment (loss) gain 18 (330)
Reclassification Out of Accumulated Other Comprehensive Income (Loss) [Member] | Other Income (Expense), Net [Member]    
Reclassification Adjustment Out of Accumulated Other Comprehensive Income (Loss) [Line Items]    
Defined benefit plan adjustments - actuarial gain (loss) $ (51) $ 19
v3.23.2
Equity - Tax Effects Related to the Change in Each Component of Other Comprehensive Income (Loss) (Detail) - USD ($)
$ in Thousands
 3 Months Ended
Mar. 31, 2023
Mar. 31, 2022
Equity [Abstract]    
Unrealized gain (loss) on available-for-sale securities, Before-Tax Amount $ 109 $ (1,283)
Unrealized gain (loss) on available-for-sale securities, Tax (Expense) Benefit (26) 308
Unrealized gain (loss) on available-for-sale securities, Net-of-Tax Amount 83 (975)
Reclassification adjustment for amounts related to available-for-sale investments included in net (loss) gain, Before-Tax Amount (18) 330
Reclassification adjustment for amounts related to available-for-sale investments included in net (loss) gain, Tax (Expense) Benefit 4 (79)
Reclassification adjustment for amounts related to available-for-sale investments included in net (loss) gain, Net-of-Tax Amount (14) 251
Reclassification adjustment for amounts related to defined benefit plan adjustments included in net (loss) gain, Before-Tax Amount 51 (19)
Reclassification adjustment for amounts related to defined benefit plan adjustments included in net (loss) gain, Tax (Expense) Benefit (16) 6
Reclassification adjustment for amounts related to defined benefit plan adjustments included in net (loss) gain, Net-of-Tax Amount 35 (13)
Foreign currency translation adjustment, Before-Tax Amount 8,678 (905)
Foreign currency translation adjustment, Net-of-Tax Amount 8,678 (905)
Total Other Comprehensive Income (Loss), Before-Tax Amount 8,820 (1,877)
Total Other Comprehensive Income (Loss), Tax (Expense) Benefit (38) 235
Other Comprehensive Income (Loss), net of tax $ 8,782 $ (1,642)
v3.23.2
Redeemable Non-controlling Interest - Summary of Redeemable Non-controlling Interest Activity (Details)
$ in Thousands
 3 Months Ended
Mar. 31, 2023
USD ($)
Redeemable Noncontrolling Interest, Equity, Carrying Amount [Abstract]  
Reclassification of non-controlling interests $ 443,757
Redemption of redeemable non-controlling interest (1,519)
Net income attributable to redeemable non-controlling interests 2,809
Annual recurring compensation earned (2,809)
Translation adjustment 430
Balance as of March 31, 2023 $ 442,668
v3.23.2
Redeemable Non-controlling Interest Additional Information (Details)
$ in Millions
 3 Months Ended
Mar. 31, 2023
USD ($)
Redeemable Noncontrolling Interest, Equity, Carrying Amount [Abstract]  
Annual dividend recognized to redeemable non-controlling shareholders $ 2.8
v3.23.2
Loss Per Share - Summary of Calculation of Basic and Diluted Loss Per Share (Detail) - USD ($)
$ / shares in Units, shares in Thousands, $ in Thousands
 3 Months Ended
Mar. 31, 2023
Mar. 31, 2022
Numerator    
Net loss attributable to ADTRAN Holdings, Inc. $ (34,464) $ (1,127)
Denominator    
Weighted average number of shares – basic 78,358 49,113
Effect of dilutive securities    
Weighted average number of shares – diluted 78,358 49,113
Loss per share attributable to ADTRAN Holdings, Inc. - basic $ (0.44) $ (0.02)
Loss per share attributable to ADTRAN Holdings, Inc. - diluted $ (0.44) $ (0.02)
v3.23.2
Loss Per Share - Additional Information (Detail) - shares
shares in Thousands
 3 Months Ended
Mar. 31, 2023
Mar. 31, 2022
Antidilutive Securities Excluded From Computation Of Earnings Per Share [Line Items]    
Anti-dilutive effect excluded calculation of diluted earnings per share 400 100
Unvested Stock Options, PSUs, RSUs and Restricted Stock [Member]    
Antidilutive Securities Excluded From Computation Of Earnings Per Share [Line Items]    
Anti-dilutive effect excluded calculation of diluted earnings per share 100 5
v3.23.2
Segment Information - Additional Information (Detail)
$ in Thousands
 3 Months Ended
Mar. 31, 2023
USD ($)
Segment
Category
Mar. 31, 2022
USD ($)
Segment Reporting Information [Line Items]    
Number of reportable segments | Segment 2  
Number of categories | Category 3  
Depreciation expense $ 7,600 $ 2,800
Network Solutions [Member]    
Segment Reporting Information [Line Items]    
Depreciation expense 1,500 200
Services And Support [Member]    
Segment Reporting Information [Line Items]    
Depreciation expense $ 2 $ 3
v3.23.2
Segment Information - Revenue and Gross Profit of Reportable Segments (Detail) - USD ($)
$ in Thousands
 3 Months Ended
Mar. 31, 2023
Mar. 31, 2022
Segment Reporting Information [Line Items]    
Revenue $ 323,912 $ 154,518
Gross Profit 87,808 54,316
Network Solutions [Member]    
Segment Reporting Information [Line Items]    
Revenue 282,418 138,374
Gross Profit 63,288 47,721
Services & Support [Member]    
Segment Reporting Information [Line Items]    
Revenue 41,494 16,144
Gross Profit $ 24,520 $ 6,595
v3.23.2
Segment Information - Revenue Information by Category (Detail) - USD ($)
$ in Thousands
 3 Months Ended
Mar. 31, 2023
Mar. 31, 2022
Disaggregation Of Revenue [Line Items]    
Revenue $ 323,912 $ 154,518
Subscriber Solutions [Member]    
Disaggregation Of Revenue [Line Items]    
Revenue 79,336 56,722
Access & Aggregation Solutions [Member]    
Disaggregation Of Revenue [Line Items]    
Revenue 96,820 $ 97,796
Optical Networking Solutions    
Disaggregation Of Revenue [Line Items]    
Revenue $ 147,756  
v3.23.2
Segment Information - Revenue Information by Geographic Area (Detail) - USD ($)
$ in Thousands
 3 Months Ended
Mar. 31, 2023
Mar. 31, 2022
Revenue from External Customer [Line Items]    
Revenue $ 323,912 $ 154,518
United States [Member]    
Revenue from External Customer [Line Items]    
Revenue 131,466 99,048
United Kingdom [Member]    
Revenue from External Customer [Line Items]    
Revenue 57,397 30,388
Germany [Member]    
Revenue from External Customer [Line Items]    
Revenue 76,286 10,920
Other International [Member]    
Revenue from External Customer [Line Items]    
Revenue $ 58,763 $ 14,162
v3.23.2
Liability for Warranty Returns - Additional Information (Detail) - USD ($)
$ in Thousands
 3 Months Ended
Mar. 31, 2023
Dec. 31, 2022
Mar. 31, 2022
Dec. 31, 2021
Product Warranties Disclosures [Abstract]        
Period of assurance-based warranty for product defects 90 days to five years      
Liability for warranty obligations $ 7,200 $ 7,196 $ 5,143 $ 5,403
v3.23.2
Liability for Warranty Returns - Summary of Warranty Expense and Write-off Activity (Detail) - USD ($)
$ in Thousands
 3 Months Ended
Mar. 31, 2023
Mar. 31, 2022
Product Warranties Disclosures [Abstract]    
Balance at beginning of period $ 7,196 $ 5,403
Plus: Amounts charged to cost and expenses 1,077 344
Plus: Foreign currency translation adjustments 26  
Less: Deductions (1,099) (604)
Balance at end of period $ 7,200 $ 5,143
v3.23.2
Commitments and Contingencies - Additional Information (Detail)
€ in Millions, $ in Millions
 3 Months Ended
Mar. 31, 2023
EUR (€)
Mar. 31, 2023
USD ($)
Mar. 31, 2023
USD ($)
Dec. 31, 2022
USD ($)
Commitments and Contingencies Disclosure [Abstract]        
Aggregate exit compensation payments obligation € 309.5   $ 335.6  
Expire date of exit compensation Mar. 16, 2023 Mar. 16, 2023    
Annual recurring compensation obligation € 10.5 $ 11.3    
Accrued annual recurring compensation obligation   $ 2.8    
Commitments related to performance bonds     11.7 $ 22.0
Commitments related to performance bonds expiration month and year 2031-04 2031-04    
Purchase commitments     $ 459.3  
v3.23.2
Restructuring - Schedule of Reconciliation of Restructuring Liability (Detail) - USD ($)
$ in Thousands
 3 Months Ended 12 Months Ended
Mar. 31, 2023
Mar. 31, 2022
Dec. 31, 2022
Restructuring and Related Activities [Abstract]      
Balance at beginning of period $ 159 $ 1,514 $ 1,514
Plus: Amounts charged to cost and expense 2,437 $ 2 1,629
Less: Amounts paid (1,574)   (2,984)
Balance at end of period $ 1,022   $ 159
v3.23.2
Restructuring - Schedule of Components of Restructuring Expenses Including in Condensed Consolidated Statements of (Loss) Income (Detail) - USD ($)
$ in Thousands
 3 Months Ended 12 Months Ended
Mar. 31, 2023
Mar. 31, 2022
Dec. 31, 2022
Restructuring Cost And Reserve [Line Items]      
Total restructuring expenses $ 2,437 $ 2 $ 1,629
Cost of Sales [Member]      
Restructuring Cost And Reserve [Line Items]      
Total restructuring expenses 76    
Cost of Sales [Member] | Network Solutions [Member]      
Restructuring Cost And Reserve [Line Items]      
Total restructuring expenses 58    
Cost of Sales [Member] | Services & Support [Member]      
Restructuring Cost And Reserve [Line Items]      
Total restructuring expenses 18    
Selling, General and Administrative Expenses [Member]      
Restructuring Cost And Reserve [Line Items]      
Total restructuring expenses 2,180 $ 2  
Research and Development Expenses [Member]      
Restructuring Cost And Reserve [Line Items]      
Total restructuring expenses $ 181    
v3.23.2
Restructuring - Schedule of Components of Restructuring Expense by Geographic Area (Detail) - USD ($)
$ in Thousands
 3 Months Ended 12 Months Ended
Mar. 31, 2023
Mar. 31, 2022
Dec. 31, 2022
Restructuring Cost And Reserve [Line Items]      
Total restructuring expenses $ 2,437 $ 2 $ 1,629
United States [Member]      
Restructuring Cost And Reserve [Line Items]      
Total restructuring expenses 1,119 $ 2  
International [Member]      
Restructuring Cost And Reserve [Line Items]      
Total restructuring expenses $ 1,318    
v3.23.2
Subsequent Events - Additional Information (Detail) - USD ($)
$ / shares in Units, $ in Millions
May 08, 2023
Jun. 30, 2023
Subsequent Event [Member]    
Subsequent Event [Line Items]    
Dividend declaration date May 08, 2023  
Common stock dividends per share declared $ 0.09  
Dividend record date May 23, 2023  
Dividend payment date Jun. 06, 2023  
Scenario Forecast [Member]    
Subsequent Event [Line Items]    
Quarterly dividend payable, aggregate amount   $ 7.1